Public Bill Committee

[Mr Philip Hollobone in the Chair]

The Committee deliberated in private.

Examination of Witnesses

Frances Coulson, Ann Lewis, Julie Bishop, Gillian Guy and Simon Pugh gave evidence.

Philip Hollobone: I welcome our witnesses. We will hear evidence from Shelter, Citizens Advice, the Law Centres Federation, the Advice Services Alliance and R3. For the record, I ask each of our witnesses to introduce themselves by name and organisation to the Committee. Once you have all done that, if any of you would like to make a brief introductory statement, you are most welcome to do so. We will start with Frances Coulson.

Frances Coulson:  My name is Frances Coulson. I am president of R3, the insolvency trade body. We have 97% of insolvency practitioners as our members, and I am a lawyer.

Ann Lewis:  My name is Ann Lewis. I am policy director at the Advice Services Alliance. We are the umbrella body for the advice networks, and some of our members, but not all, are represented in this room.

Julie Bishop:  My name is Julie Bishop. I am director of the Law Centres Federation. There are about 56 law centres around the country, and they are staffed mostly by lawyers.

Gillian Guy:  I am Gillian Guy, chief executive of Citizens Advice, which is the central body for citizens advice, and I am representing that and almost 400 separate bureaux, which are particularly affected by the legal aid proposals.

Simon Pugh:  I am Simon Pugh, head of legal services at Shelter. We are a national social welfare law provider, specialising particularly in housing debt and welfare benefits.

Philip Hollobone: Thank you for those introductions. I encourage you to speak up crisply and clearly because you are not only addressing the Committee but, in many ways, addressing the nation, and we want to hear what you have to say. We will now start the evidence session. We will start with Mr Llwyd and then go to Mr Watts, Alex Cunningham, Yvonne Fovargue, Liz Truss, Kate Green, Robert Buckland and Andy Slaughter.

Q 243243

Elfyn Llwyd: The Government intend to make legal aid available in cases involving domestic violence, but you will know that there has been some discussion about the definition of domestic violence in the Bill. The Government have now widened it somewhat. Do you believe that the new definition is adequate and sufficient?

Julie Bishop:  The one thing that we would say is that law centres’ specialty is within the area of social welfare law, but our involvement with domestic violence is often where it is a trigger for social welfare law problems. In relation to your question, though, according to the impact statement, only an additional 1,000 people will be assisted under the widened definition. We believe that means that it has only been tweaked, as opposed to widened. We support the submission from the Women’s Institute and the definition that it proposes for domestic violence.

Gillian Guy:  Broadening the definition is helpful, but the main issue is identifying where domestic violence occurs. Our experience in Citizens Advice is that it is very often a secondary issue. If we are not giving advice on the primary issue—debts or housing issues—we are unlikely to pick it up and therefore get the representation that people need.

Q 244

Dave Watts: The Prime Minister is on record as saying that Citizens Advice is a wonderful organisation and that he wants to do all he can to support it. What would he need to do, and what resources would he have to provide, for you to be able to cope with the potential changes and the demands that are being put on the service?

Gillian Guy:  First, I would have to agree with the Prime Minister’s assessment. There are two sets of issues that really bother us about the reforms. One is the taking out of scope of debt, housing and benefit advice, which will leave an advice gap. If those things are, indeed, to come out of the scope of legal aid, the Government will need to make proper alternative provision to fill that gap. That is the first argument. The second is that if they do come out, people cannot just land nowhere. Where will they go? I suspect that they will go to MPs’ surgeries, but they have to have somewhere to go to get advice. We have to be able to realise the return on investment in early intervention and early advice, which will have gone if we do not have alternative provision. We have to make sure that vulnerable people are not unassisted going through proceedings or getting themselves out of the chain of events that takes them into proceedings. The first set of issues therefore relate to the fact that there has to be an alternative if these proposals are to go forward.
The second set of issues relate to the fact that the legal aid that is in scope under the proposals is particularly complex in terms of eligibility and hard to apply, so there will need to be more clarity and simplicity around that. There would also need to be something to bring two particular issues together, because there is an intention under the proposals to segregate what is seen as general advice and what is seen as pure legal advice. People do not present as purely one thing or the other; they present with a number of issues, many of which are intertwined, and we need to make sure that there is a way of not segregating advice, because life is not like that, and people are not like that. We have to look at the whole system to make the proposals work.

Q 245

Dave Watts: What increase in resources would you require to carry out the functions you have just set out? Have you any estimates of what your members’ associations would need to do that?

Gillian Guy:  I know what we currently get to do that—£25 million. That is a stretch as it is, as is the case with all these resources. I would also like to point out to the Committee that that should not be seen in isolation. We face local government cuts in the localities where bureaux give advice. We face financial inclusion money cuts, which were given a reprieve, but we still have to face that issue. And here is another £25 million being taken out of the advice system. We would need at least as much as we get currently, but demand is not standing still. We have welfare reform coming along, which will bring an increase in demand. We also have a recession, as I think we have all noticed, that is increasing debt and housing problems so that demand is burgeoning.

Q 246

Elizabeth Truss: Is it not the case that quite a few of these issues are not strictly legal matters? At the moment, Britain treats them as legal matters, which is why we have such a high legal aid bill compared to other countries. If you look at the scope of legal aid in other countries, you see that it is narrower, and there is a lower income threshold. On issues such as the welfare system, should we not improve services at source so that fewer errors are, for example, made in the benefits system in the first place that require legal redress? Do you agree with the general principle that it is wrong to spend all this money on legal services when strictly legal issues are not the reason why the problems have been caused in the first place?

Ann Lewis:  I think we would all agree that if the benefits system could be made more straightforward and less legalistic, that would be a good thing. However, at the moment it is legalistic and complex. I have quotes from judges, which I will not read out to you, who use words like “labyrinthine” and “bewildering” when talking about the benefits system. Before I came this morning, I checked out the handbook that is used by many welfare benefit advisers, the Child Poverty Action Group handbook. It has 1,600 pages and refers to 45 Acts of Parliament and 185 regulations. The system at the moment is complex and some people in the system need specialist welfare benefit advice. That is our view.

Elizabeth Truss: Does that advice necessarily have to be legal?

Ann Lewis:  Yes, at the moment the system is so complex that some people in some situations—not all people, and not for all problems—need specialist welfare benefit advice. That is legal advice; this is a legal structure.

Julie Bishop:  There are two things to answer. One is that to resolve the client’s whole problem we need to provide a number of services to them, some legal and some non-legal. However, our agencies work together in a streamlined and co-ordinated fashion. I have put an example of one in our evidence, where in fact we have referral routes. In the case of law centres, the problem does not come to us until it is a legal problem, so we use legal skills and legal aid to resolve legal problems. We do not provide generalist advice to deal with a legal problem.
The second point I wanted to answer was your question about the scope being narrower in other countries. As you can hear from my accent, I can speak about the Australian jurisdiction. The equivalent of social welfare law there is handled differently—you are correct—but it does come out of what is called the Attorney-General’s Department. Sixty million Australian dollars is given to the equivalent of law centres, which have a wide jurisdiction. There are 200 of those. They serve a couple of hundred thousand people per year. Those people are not means-tested. The funding is flexible, but the centres are also funded to do public legal education and to have a look at systemic issues and provide solutions to Government, with respect to the knowledge and learning that comes from that.
When you talk about legal aid, therefore, there are different formats for it, and I think a number of your pieces of information do not include Aboriginal legal aid, or the community legal advice service, or something called the family violence centres. They—again, out of the legal aid pocket—deal with issues of family violence.

Q 247

Elizabeth Truss: I am very interested to hear more about this. Do you have an assessment of the overall cost of advising in that way, as opposed to the way advice is provided here in the UK?

Julie Bishop:  I am not an economist, but I think another really key difference is that legal aid in Australia is by and large a salaried service. That means that there are grants of legal aid, but private lawyers are so poorly funded with their grants of legal aid in Australia that they regard it as pro bono, more or less. So it is true to say that the hourly rate is much lower. However, the bulk of legal aid is actually delivered through a salaried service. So the format—the way legal aid is delivered—is actually quite different, and that can help to explain some of the differences.
I can get you some more information, and I will.

Q 248

Elizabeth Truss: That is extremely helpful.
In terms of the proposals that the Government have put forward in the Bill for the reform of legal aid, do you think that the bill is too high at the moment—that is a general question for the panel—and do you see alternative ways in which that legal aid bill could be reduced; or are you saying that it is essentially being generated by other parts of government, such as the excessively bureaucratic welfare system?

Gillian Guy:  To answer two questions in one, it would be great if none of us were needed any more. That is where we would probably aim for; but I think things are going to get worse before they get better. When we talk about welfare reform, for example—solving those issues—we have got to go through transition and dual running first. There is going to be a lot of confusion that we will have to pick up. The danger I see in being legalistic about what is legal and not legal is that it is very difficult to make that kind of definition and draw that line. That is why we are arguing that we need a whole-system approach to advice. We also need to be mindful of the fact that early intervention advice saves things from becoming technically legal and costing the system an awful lot more once they get to that point. If we are able to resolve issues at an early stage, we save the court system, the tribunal system and all those things a lot more cost further down the line.
In terms of international comparisons, we need to be aware that it is difficult to compare jurisdictions, benefit systems and those kinds of things. That is all very complicated. But there are certainly assumptions here that the only cost driver for legal aid is the scope. There are potentially many other cost drivers that ought to be looked at before that, one of which is how things are screened. There is early advice and prevention that goes on. One cost driver relates to an entirely bureaucratic system that we have all suffered at the hands of for some time, which wastes money and takes it away from the front line, and one cost driver relates to the balance. If we look at the legal aid expenditure, in relative terms, there are just a few very, very expensive cases that are funded through that system. Investment early on in many, many more cases bears considerably more fruit in terms of cost coming out of the system.

Simon Pugh:  I would add that the overall spending on social welfare law, which is what we are talking about here, is a small part of the legal aid budget—it is only about 5% or 6%. I echo the importance of giving early advice at an early stage of the problem to resolve it and stop it getting worse and reaching the point where you need very expensive court proceedings. That early advice—important though it is—is still legal and is still on a matter of and a question of law, but it is a way of avoiding having to go to court proceedings or tribunal proceedings. If we can intervene at an early stage, we can stop cases spiralling to the point where they cost more later on.

Q 249

Elizabeth Truss: One more point. On the subject of tribunals, is it not the case that the legal aid system has partly driven the legalisation of some of these bodies? Tribunals were initially not meant to be bodies where lawyers would represent people, but that has ended up happening. That is partly because we are pushing more money through legal aid, rather than into other ways of solving these problems.

Simon Pugh:  I would argue that that is largely because of the complexity of the work that we are dealing with. Ann has pointed out how complex the welfare benefit system is. That law is very complex and difficult, which is why people need the help of lawyers to navigate it. You could reduce costs by simplifying the system and making it easier for people and easier to prevent most mistakes from happening in the first place. That way, you reduce demand rather than simply cutting out the supply.

Ann Lewis:  The situation is that, in most tribunals, legal aid is not available to fund representation in any event. It is available for, for example, mental health and immigration. That argument cannot apply to the larger tribunals, such as employment and welfare benefits or social security, or whatever it is called.

Q 250

Kate Green: I would like to pursue the argument about reducing costs by simplifying the system. Gillian Guy, you mentioned that you were obviously anticipating some substantial welfare reforms and that, at least for a time, there would be transition problems and parallel running of the system, which would create a greater need for advice. In the long run, is your expectation that the system will become sufficiently simpler as a result of universal credit and other reforms, to the extent that the Government’s proposals could be made workable?

Gillian Guy:  The answer needs to be that we are optimists by nature. Obviously, the whole aim of the provision is to simplify the system, so that we do not have to duplicate data and information. We need to make sure that people understand what benefit they are entitled to. We are also realists about, as you say, that transitional part, which will be extremely complicated. The other point is that there is an intention to simplify but, as ever, the devil will be in the detail. We are trying to be constructive and to work with the Government through that detail but, ultimately, the question will be: is this achievable and will it be as simple and clear as it sets out to be?

Q 251

Kate Green: In terms of more vulnerable clients—people perhaps with learning or mental health difficulties and so on—do you anticipate the system becoming simple enough for them to navigate without assistance?

Gillian Guy:  I suspect that they will always need assistance and that is why at Citizens Advice we are protecting our face-to-face advice as well, because another feature of these proposals, of course, is telephone access, which immediately excludes a large number of people who just need to empty out a carrier bag of things in front of someone, sort through them and get some advice.

Q 252

Robert Buckland: This is primarily a question for Gillian Guy. I have read the submissions from Citizens Advice—LA15—with care and I was particularly interested in the last paragraph and the proposals to allow, in effect, for the creation of local legal advice partnerships. Am I right in thinking that that would be a shift in commissioning, so that the partnership or the CAB would be the commissioner of legal services locally?

Gillian Guy:  That was a proposal put forward by Citizens Advice to try to deal with the issues that I outlined earlier, which are about needing a whole system and not having an artificial separation between what is seen as general and what is seen as legal, because the complication and the continuum go through an entire system. It was an attempt to say that if we drew out the advice from what is proposed in the Bill and put a whole system together, we could take it into local commissioning so that it dealt with local advice need from beginning to end.
I know that that does not particularly meet the Government’s policy objectives, and that is because the Government want to be very clear about what is in legal aid. I understand that from the perspective of not having the growth and the creep that have gone on in past years. I understand that proposal. It is not necessarily attractive, but we think that that could work to resolve some of the issues that we have spoken about. The alternative is to ensure that at least we have some more provision at the advice end, which is currently a gap in the Bill, and we have to work together to think how that interface will be affected. Otherwise we will have the separation.

Q 253

Robert Buckland: Thank you for the detail in that answer. Following up, how would that work, for example, with local private practices and practitioners? Would they be involved in the system, or would they be outwith this idea of commissioning? How would that work?

Gillian Guy:  Our idea was that it would involve all local advice givers, so that we were not tripping over each other, we understood what the local need was and we worked together to meet that need in the most cost-effective and efficient way.

Julie Bishop:  I just want to add to what Gillian said. The Committee might be interested to visit a well-functioning example of that, which is called Advice Services Coventry. It already uses technology appropriately and it has streamlined methods for referral. It does hot referrals, whereby if you walk into one agency and they are not able to deal with an issue, that agency can send the notes on via computer. It has protocols to work with local private advisers and it has been running for the past five years.
That is but one example, but if you were interested it is quite a good example to have a look at to see how a conception, such as the one that Gillian is putting forward, is actually working in practice. It also fits in with the Government’s agenda, because it is bottom-up, it is local and addresses local needs, and it provides needs-based strategic planning. It uses Legal Services Research Centre needs analysis to provide mapping of where it has to target services, etc.

Q 254

Robert Buckland: I just want to follow up that point. I am generally very interested in your evidence, Julie Bishop, so thank you very much for that.
I want to come back to the problem that the Government have. I think that we all acknowledge that the issue for the Government is how they control the budget and manage to keep a purchase on their expenditure on proper legal aid. I accept the point that you made that a person coming along for advice does not turn up and go, “Hello, I’m a legal debt problem.” They turn up with a multiplicity of issues and it is often the task of the adviser to work out which category the person might fall into. That is the position with legal aid currently.
Could a system be developed so that, in effect, there were two thresholds? One would be the general threshold that you come in on and then there would be a further threshold to ensure that the Government’s objective of controlling the legal aid budget was met, so that, in other words, only people who were filtered through would get proper legal advice that was properly funded.

Julie Bishop:  Yes. That is exactly the protocol that is in place in Coventry, where someone can come in for advice. If they arrive first of all at the law centre and it is not deemed appropriate, their case would be sent off to a more general agency to deal with those other problems. For example, with an employment matter, if it is something that ACAS can deal with, the other agency would have assisted them to deal with it that way. It is only once a person is dismissed, or needs something that is of a more legal nature, that they are actually referred to Coventry law centre.
It is our view that the Government have a very difficult rationing problem. As grass-roots agencies, this is the nature of our game. That is what we do—we ration services every day. So the Coventry example has been a mechanism to try and effectively ration very limited resources. The collaboration is one means of doing it. What the Coventry example gives us is the ability to deal with the person who has a multiplicity of needs. It is not someone who happens to say, “Hi, I’m in debt and please ignore my loss of job”.

Gillian Guy:  If I may add another point, what I think we are trying to describe together is getting the right people, the best people with the suitable qualifications, to deal with the right level of problem. What we would not be talking about, which we currently endure, is a system whereby we have that dictated by funding streams. The reason that we are particularly anxious about segregation of issues is that we can have legal advisers, funded through legal aid, who sit idle for hours during the day when they could be giving advice on other funding streams, but there is that accountability for how that is managed. That is why we do not want to see people parcelled up and sent from one place to another. We want a collaborative approach that allows us to pool our resources and use them most effectively to resolve problems.

Q 255

Yvonne Fovargue: If social welfare law is removed from scope, what will be the impact on your networks and all the advice services that you provide?

Julie Bishop:  I can speak for law centres directly. I think we have supplied in the evidence that around 80% of our legal aid funding will go. We have already lost 53% of local authority funds. That is not foreshadowed; that is lost already. We estimate that, when you add all the bits of funding together, a minimum of 40% of our funding will be removed. That clearly means that we have to reduce and really think very carefully about who we can see and who we cannot, and what we do and do not focus on. The short of it is that for law centres alone, 80,000 people will not be served. Of those 80,000, 79.5% are not white. More startling, more than 90.5% earn less than £6,000 a year. So I am not sure what will happen. Many of our clients will not be at MPs’ surgeries, because they do not have the wherewithal to get to them. They will be in doctors’ surgeries, hanging around churches and sitting on streets begging for money. They will be adding cost to Government elsewhere in the system. That is where our clients will be.

Simon Pugh:  Shelter estimates that if the proposals go through we would lose approximately 45% of our income from legal aid. All of our advice centres across the country do legal aid in combination with other things. The impact of that on the viability of each individual advice centre is something that we would have to think about very carefully. We would not expect our charitable fundraising to be able to expand sufficiently to fill that gap. We help about 25,000 people a year through legal aid and we would lose many of those cases. There would be large numbers of people who we would no longer be able to help.
We are also concerned about the impact on the people whom we would be able to help. We deal with housing, welfare benefits and debt, in many places, and, as has been said repeatedly, people do not have a housing problem, a debt problem or a benefits problem: they have all three. If we can no longer deal with the whole issue, we are not solving the problem.
If we have a client who comes in, who is in arrears and at risk of having their home repossessed because they have housing benefit issues, at the moment we can get the possession proceedings adjourned and deal with the housing benefit issues. When the case comes back to court, the benefit problems are resolved, the arrears are brought down, and the client is allowed to continue to stay in their home.
Under the proposals in the Bill, we would not be able to deal with the underlying issue and resolve the cause, so we would simply be able to adjourn the case, and send the client off to do their own benefits work: it is not going to happen—we would come back to court and nothing would have changed. If we cannot solve the underlying problem, because we cannot deal with the whole issue, that will have a significant impact on the people we are still able to help.

Gillian Guy:  As I said earlier, we currently get £25 million through legal aid. The impact on Citizens Advice is that £20 million of that would go under the proposals. That is an 80% cut in funding. That would mean that about 450 advisers would go from within the Citizens Advice system. Clearly, that starts to hit, with the other funding issues that I have mentioned, at the viability of bureaux—particularly in the context in which it is not spread evenly among bureaux. Only about half of them have legal aid contracts, so the percentage of their relevant income is much higher than if the funding were spread across the whole piece.
Also, the impact is random, and that is particularly dangerous given where advice will and will not be available. There will be areas, we imagine, that will be hit higher. The smaller contracts that could come out of legal aid will probably not be economically viable or attractive, so we could see advice agencies and, indeed, small firms of advisers and lawyers, going out of business or, certainly, keeping out of legal aid work.

Ann Lewis:  I would just like to put that evidence into the wider context of what is going on with our other members. We have members including Age UK—previously Age Concern—Youth Access and DIAL UK, which is a network of disability advice organisations. All those organisations report that their members are losing funding to the tune of between 20% and 40%, so the capacity in the wider sector is also going down. I think that we shall find clients, or potential clients, having to go from place to place trying to find someone with the capacity to help them.

Q 256

Yvonne Fovargue: Can I just move on slightly, to debt work? What do you think the effect, and extra costs, might be of restricting access to debt advice to people who are at imminent risk of losing their home?

Simon Pugh:  If we are not able to help people who present to us with arrears problems early on, we may not be able to negotiate a solution, for example with the landlord, to give them time to repay it. If we can deal with something only when the risk is immediate, it may well be too late to solve the problem by then.

Julie Bishop:  I think the answer is that it is poor value for money. Instead of spending less than £200 resolving the issue early on we will be waiting until it has to go to court. It will cost more money. It is not just poor value for money in terms of pounds; it is poor value for money in terms of stress and heartache for the person who must get to that stage.

Ann Lewis:  Even if you are able to resolve the debt issues that result in threat of loss of the home, if there are other debt issues, any solution in relation to the potential homelessness risks being only a temporary one. People are likely to come back again unless you have resolved all the debt problems, in so far as that is possible.

Gillian Guy:  It is a feature of any system that is geared towards a crisis point that it exacerbates and multiplies the number of crises that we will have to deal with, because it will not be possible to give the advice at an earlier stage. The social cost to that, as well as the economic cost, is enormous.

Tom Brake: May I ask Gillian Guy, did you say you had advisers sitting idle, paid for by legal aid, who could not do other work because they are being paid for on legal aid?

Gillian Guy:  I said it was a feature of any system where the accountability says certain people, under funding streams, can do only certain work, that inevitably other work will come in through the door that they cannot pick up. So there is a possibility that, on any one day or on any one occasion, they could be left idle while there is work to do.

Q 257

Tom Brake: If that is happening, are there not ways within Citizens Advice that you could organise that better? Presumably there is business in other CABs that those people could be doing.

Gillian Guy:  The explanation was about the unforeseen and probably unintended consequences of having strict funding. The reality on the ground is that I would be hard pressed to find anyone who was actually sitting doing nothing. But it is a feature of the system itself. Actually, I am sure that we find ways around all of that, as that is what we do as advice agencies on a daily basis—every one of us—because we are dealing with more demand than we can cope with. But in terms of accountability, we are not supposed to do that. So when we have to tell the Legal Services Commission what we spend the money on, we cannot spend it or be deemed to have spent it on anything that is not within the remit of that legal aid contract.

Q 258

Tom Brake: May I ask you and indeed the representatives of the other organisations another question? When we received evidence from the Bar Council on Tuesday, its representative talked about providing more training for barristers in mediation because the Bar Council thought that there was still potential to expand in that area. Anticipating what will perhaps be an increase in mediation work, what are your organisations doing collectively to increase the number of mediators to take up that work? Can you increase the number?

Julie Bishop:  There are two answers to that question. The first is that the way that law centres try to solve problems is always diversionary. That is what they were set up to do. It was to use legal skills and to bring an understanding and knowledge of the law to people’s problems so that they could be resolved effectively, but that does not mean going to court. So the choice is always to ring and to try to get a negotiated settlement. That is our practice as it is. The staff may not be licensed mediators, but their method of working is alternative dispute resolution in the broadest sense. That is one answer to the question.
The second answer to the question is, yes, like all other organisations we are looking more extensively at mediation and at what sort of training there is. There are many issues with mediation, not least of which is that there are a lot of different qualifications and different styles of mediation, and so on.
So it is a big area, but the simple answer is, “Absolutely, that’s what we’re looking to.” But I want to stress that our practice is one of diversionary early resolution anyhow.

Q 259

Tom Brake: But you have an active programme of extending mediation through a number of people working in that field?

Julie Bishop:  I would not say that we have a funded active programme of doing it, but we certainly have an active project of investigating and determining where we might get money to do it. Remember that we have lots of big ideas, but we have very limited resources. Often our resources are running up behind the ideas.

Ann Lewis:  For the advice sector, many of the problems that people bring to us concern issues about services provided by the state: benefits; housing; community care; education; and so on. One of the difficulties in that situation is that often mediation is not possible because the arms of the state are not able to engage with mediation either, and that is a limiting factor.

Gillian Guy:  As Citizens Advice, we think that mediation is one of the tools, in its loosest sense, that we have. But like the Law Centres Federation, it is not about having registered mediation.
It is important to say that that is one of the things that drives us—trying to stop people getting caught up in the whole of the legal system, which we know is costly, including emotionally costly, and it tends to extend the period of time that a problem exists for. That would be our aim, but it is important not to mislead the Committee that suddenly there could be a mediation system that grows up in the voluntary sector and operates on thin air, because that will not happen, it cannot happen and, although we are extremely good value, we are not free.

Simon Pugh:  For the reasons that everybody has given, many of our cases are not suitable for formal mediation, but we try to avoid the need for court proceedings wherever possible. In many cases, that is the absolute last thing that our clients want to do. They want to avoid court. We actively try to seek an early resolution. We try to negotiate, discuss and settle cases, and it is an achievement when we do that.

Q 260

Tom Brake: May I ask a slightly different question about your funders? This is particularly for Gillian Guy and Julie Bishop. Is there any uniformity of approach from local authorities, for instance, on the level of funding, or are you finding that some support local CABs and others cut the budget completely? Does it depend very much, in that are some local authorities making a conscious decision to support their CABs or law centres, whereas others are making the contrary decision?

Julie Bishop:  Yes. Earlier in the year, we surveyed every law centre to find out what was happening on that question. We found one law centre that got a 12% increase, many that had had a 100% cut, and all varieties in between.

Gillian Guy:  For citizens advice bureaux, there is no uniformity. Some of the differences are explicable and probably desirable, but generally, there is no uniformity on funding. Where authorities have taken a positive decision to keep supporting the advice service, it is very often because they have seen, registered and acknowledged the return on investment argument for it, which is the argument that we are making for legal aid as well.

Simon Pugh:  That has very much been our experience as well. We have a range of centres that have contracts with local authorities for either advice work or Supporting People-type contracts. It is completely variable from area to area what is happening with those contracts.

Q 261

Alex Cunningham: Ms Bishop said that some 80,000 people who attend law centres will not be getting that service in future, and Ms Guy spoke of the tightened budgets to do what you are doing now, yet you face even more of a work load in future. How will you cope with that? Who are the losers? Are we facing a deficit of opportunities for appropriate support, or are we facing much more of the rationing that Ms Bishop spoke about?

Simon Pugh:My worry on a number of fronts is that if we lose substantial amounts of our legal aid income, there will be a number of clients whom we will just not be able to help any more. We will not be able to expand our charitable resources sufficiently to fill that gap. A further worry is that that will lead, not just within Shelter but across the entire advice sector, to a loss of the skills base. A lot of people will no longer be able to work in the advice sector and do this type of work. Therefore, there will not be people there to help in future.

Q 262

Alex Cunningham: So who are the losers?

Simon Pugh:  Clients and advisers now, and clients in the future, who will not have advisers with the appropriate skills to help them when they need it.

Q 263

Alex Cunningham: But what sort of problems? The homeless or families?

Simon Pugh:  All of those: the homeless, people in receipt of benefits, homeowners who are going through a difficult time, tenants having difficulties with their landlords or with local authorities. Anybody who is vulnerable and who currently needs legal advice might not get it in the future.

Gillian Guy:  The majority of the people who present themselves to citizens advice bureaux come for debt, benefits, employment and housing advice. It will be those people, as a result of these proposals and the other squeeze, who will begin to get even further rationing of that advice. That is obviously not where we want to go as an organisation. We also have a responsibility to make sure that we are as effective as possible. We are trying to make sure that we do not stick with old cumbersome methods of getting through giving advice to people. We are looking at different ways of doing that and different operating models.
It is also important to say that if there is to be alternative provision for social welfare advice—we urge Government to put it together, and there has been some indication of that, with £20 million being set aside to look at it—it must be sustainable, and it must go on into the future, so that we do not give people hope and then take it away again. As ever, it will be the most vulnerable—those who do not know their way around systems and those who have multiple problems, because one problem brings another and another—who will suffer the most as a result.

Q 264

Alex Cunningham: How do you ration in those circumstances? Who do you turn away?

Julie Bishop:  Clearly, that is the issue, is it not? Who do we turn away, why and how? That is our problem every day—how do we ration and how do we do it? Rather than nominating today who we will turn away, one thing that I will say is that one of our key focuses in the Law Centres Federation and in law centres themselves is young people. We are concerned that young people are being particularly disadvantaged by this Bill. By young people, I do not mean under-18s; I mean under-25s. We have also submitted evidence about the impact on young people and we believe that if you do not resolve a young person’s civil legal issues—such as housing, education, income support, etc.—there is a direct correlation between that and criminality. Getting young people early, not only do you set them up for life but you also divert them from other, bigger costs to the Government in the criminal system. So we have a particular concern about young people and how they will be dealt with.
Secondly, I want to say something about rationing and what the endgame will be of this loss of funding. The Government are not only rationing but with the closure of any of our agencies they are also losing all the resources that we bring. This is not a saving figure, but for every £1 that we give to the Government we estimate that we bring in about another £15 worth of additional resources. That is from the big law firms that support us and that house the pro bono, the charitable funds that the Government are not able to access, and so on. That is to say nothing of our community links and the work that we do with community agencies, because it is that work with the non-advice sector that also gives you a full solution to the problem. What we are able to do is not only solve the legal problem, but address, through our community links, the compounding issues. When a law centre goes, you not only lose skilled workers but you will not recapture that resource that we bring.

Q 265

Damian Hinds: I want to ask Gillian Guy about your document, “Towards a business case for legal aid”, which contains some very impressive cost-benefit ratio figures; no doubt, those figures will get their fair airing in the main Chamber of the Commons. Obviously, Citizens Advice offers advice in a number of formats and through different channels other than legal aid. I wonder if you have equivalent cost-benefit calculations for those other formats?

Gillian Guy:  We do have other calculations, because in times of justification for the kind of service that we provide it is important to have the business case set out. I am very happy to provide the Committee with any other statistics that members want.

Q 266

Damian Hinds: That would be useful in a simple tabular form.
I also wanted to talk specifically about the figures. You have done this calculation that says, “For every £1 of legal aid expenditure, the state potentially saves x.” That is a perfectly reasonable thing to do; you take things like savings to the NHS and net savings to the Exchequer. Now, this may not be a reasonable question for you to answer verbally now, so perhaps you could answer it in writing later. From reading your numbers, I think that that is not what you have done. It seems like you have taken loss of employment as GDP loss and that would be many times—or at least several times—higher than the net loss to the Exchequer, which is the number that would normally be used in a cost-benefit analysis such as that. If I have read it correctly—I am not sure that I have, because I do not have your source data—that might radically change the £1 to £2.98 ratio on debt advice, for example. I wonder if you might follow up on that with a written response. Thank you.

Gillian Guy:  Okay.

Q 267

Andy Slaughter: I will put a question to Frances Coulson, if I may. I neglected to do so earlier.

Frances Coulson:  We do not get much legal aid in our office.

Q 268

Andy Slaughter: I was going to say that. There is probably not a lot of legal aid in insolvency practice and you are mainly concerned with part 2 of the Bill. Thank you for your helpful submission. I think that we are seeing some of the personal insolvency practitioners, on both sides of the argument, later on today. That is where a lot of focus has been in relation to civil litigation costs. Do you see the effect on insolvency practitioners as an unintended consequence of the Bill? Were you surprised by what you found in the Bill?

Frances Coulson:  Yes, indeed. We certainly see it as an unintended consequence. A lot of the consultation, and the Bill itself, is framed towards personal injury. We have heard a lot about cuts in legal aid budgets today, and about agencies. What we are looking at is removing the ability of insolvency practitioners to recover funds for the state.
To explain a little, quite frequently an insolvency practitioner will go into a company, or a bankruptcy, where there is no money, because the directors or third parties have, either through mismanagement or, at the extreme end, through organised crime, conspired to make sure there is no money there. The only way any money can be recovered for creditors is for the insolvency practitioners to make an investigation, which they are obliged to do, and then to bring insolvency proceedings against those third parties, for recovery.
The cases can range from mismanagement at the low end to the extreme end, such as cases that fund terrorism. I have seen several such cases myself—very serious crime. Without the ability, in those cases, to recover the success fee in litigation, the lawyers will have to work on risk, and the adverse cost premium, which, obviously, as it is an after-the-event premium, is quite high. Those costs simply come off whatever is recovered, which is supposed to go back to creditors.
In about 25% of general insolvency cases, the Revenue is the unsecured creditor. I think that the figure is probably significantly higher in cases where there has been fraud, because the Revenue is a target for fraud anyway, and tax fraud funds serious crime.
There would be three unintended effects, I think. First, cases would become uneconomic for practitioners and their lawyers to take on at all. Therefore there would be no recovery. Secondly, there would be a massive reduction in return to creditors. Creditors are obviously not only the taxpayer generally, but small businesses, employees and other people. Thirdly, there is obviously a massive deterrent effect; if you pursue people who have committed fraud and take their ill-gotten gains from them, they and others they know do not do it again.
There are other types of fraud and I have dealt with cases involving gangmasters, who can cause untold misery at the very basic level. We did one case where a non-EU national was running a company—running agricultural workers; they were on minimum wage, and there were deductions of things like £1.50 for registering them with an NHS dentist, and taking the rest of the money off them for putting them in appalling, overcrowded rooms and so forth; and the company was not paying tax either.
That company was provisionally liquidated by the Revenue. The insolvency practitioner who was appointed pursued the director, who had a house worth £250,000, with no charge on it, and took all his assets away from him; he was eventually deported. Better than that, the business was sold to a legitimate business, which employed the people with proper health and safety, a proper minimum wage and so forth. If those cases cannot be taken on a proper economic footing, the ability to do that will be removed.

Q 269

Andy Slaughter: I wonder if you have any further details of cases, and how that works; it seems to be taking us beyond the simple recovering of hidden moneys, and into prevention of crime. I do not know whether you want to say any more about criminal activity, but I have another question to ask you.
You mentioned the Revenue. You say in your submission that you think the return to creditors will be down by almost half—about 47%. I think you suggested just now that the Revenue is a creditor in about a quarter of cases—or is it a quarter by volume? Is the Revenue concerned, and is it making representations? Do you know the overall loss to the Treasury?

Frances Coulson:  I understand that the Revenue has been speaking to the Ministry of Justice. We do not know the final outcome of those discussions, but I certainly understand that they are very concerned about this. If you take some of the areas in which they have used these weapons as one of the tools in their toolbox, if you like, £2.6 billion a year is lost to the country through carousel fraud.

Q 270

Andy Slaughter: How much?

Frances Coulson:  £2.6 billion is the published figure for loss in VAT fraud on carousel. That is where insolvency is used extensively. In terms of removing a tool for tackling these things, in other general insolvency cases losses would be very significant—in billions.

Q 271

Andy Slaughter: If the changes in the Bill, in relation to reform of conditional fee arrangements and damages-based agreements, go ahead, do you see no prospect of dodgy directors, as you put them, being sued? Do you see that just collapsing as an area of law?

Frances Coulson:  It takes away at least half of those cases. Insolvency is one of those exemptions that was a reason why the original Act was introduced—to enable insolvency practitioners to bring these sorts of proceedings. They did not have the wherewithal to do that in sufficient numbers of cases before that, and I think we would go back to that situation. In fact, because the CFA work and the numbers of people willing to take it on has developed, it would probably have a worse effect—we would go backwards.

Q 272

Helen Goodman: Mr Pugh, I am not sure whether you are the right person to ask, but I have a question about homelessness and ex-offenders. We know that reoffending and homelessness are very highly correlated. Do you feel that at the moment there is insufficient co-ordination between probation trusts, prison authorities and housing organisations?

Simon Pugh:  That is not something that I have a detailed picture on, but I can certainly take that back and we can write to the Committee on that.

Helen Goodman: Thank you.

Q 273

Elizabeth Truss: I just wanted to follow up on the questions that Tom Brake was asking earlier about how services are organised. Do you think that there could be improvements, in terms of value for money, from having multiple centres: for example, having Shelter, law centres and citizens advice bureaux in the same location? Do you also think that increased use of phone and e-mail services could help save money, but deliver the end result to the consumer?

Julie Bishop:  I have mentioned the Coventry example several times now because there is a real potential for doubling up on services and so on. I raised it because I wanted to highlight the fact that the more common way we work is in collaboration with each other, rather than doubling up. The second thing to say is that we are currently not meeting demand as it stands, so would it be that we were doubling up? The fact of the matter, as we have discussed, is that we are rationing services already. Although there appear to be a lot of agencies working in the sector, we are doing it because none of us, even together, are meeting the demand that is there—that is the first thing.
The second question was about technological solutions—telephone lines, e-mail advice and so on. Law centres have long used telephone advice lines. Again, in certain situations, that is very effective. But what we have discovered in using it is that you need to have an experienced lawyer on the phone who is able to deal with the matter, understand what the problem is, be able to address whether a face-to-face appointment is required, and bring them in. The way we do telephone advice lines is to front-load the expertise, rather than have someone just read from a sheet. We do explore various other forms of technology, but what we talk about is the appropriate use of technology. Technology is a tool; it is not a solution. We try to tailor our services to client needs.
On our client profile, I have said that they earn less than £6 million—sorry, £6,000; I would prefer to be one of the former at the moment—a year, but I have not said that on average, they have low educational attainment. They have often left school early and have poor literacy and numeracy. One of our biggest problems is people’s ability to deal with the technology. Where we can, we do. Where people can help themselves, we encourage that. That is already our practice, and that is one reason why we get good value-for-money figures.

Simon Pugh:  We take much the same approach at Shelter. We have an advice website where people can log on to receive advice and information, we have a telephone helpline, and we provide legal advice over the telephone through contracts with the Legal Services Commission. We have experience of delivering legal advice and information through all the different channels. They all work, and they all deliver good advice in some cases for some people, but in some cases that is not suitable. Some people need face-to-face advice. It depends on the circumstances of the individual and their case. Where it works, it can work well, be very effective and save money, but it is not suitable for everybody or every case.

Gillian Guy:  To pick up the point about unmet demand, it is undoubtedly the case that there is enough work and more to go round all our organisations. Currently, there is quite a squeeze on the resource that we have for them. That said, I am sure that there is room for improvement. In any movement that has grown from the ground up over a number of years—our organisation has grown over 70 years—there is room to look back at that and see how we operate. Also, even with unmet demand—this is something that we would have a responsibility to look at—we sometimes trip over each other, and there is a degree of duplication, which we are mindful of and looking at. A squeeze on resources tends to make us focus on doing that, because we have a responsibility to keep services running.
I said earlier that as Citizens Advice and in the bureaux, we are looking at opening up different channels and providing advice to people in the way that they would like to receive it. That echoes the point that Simon Pugh made. In our view, there will always be a need for some face-to-face, but we ought to have the most effective and cost-effective method for each person.
It is also about public accountability. We all receive some public money, and we have to be accountable for it. I think that we are transparent about that, but there is more room around being able to share services, support services, premises and so on. That is what was in the proposal that we put forward to deal with the legal aid situation.

Ann Lewis:  I would like to respond to the question about the use of technology. I know that the Ministry of Justice has suggested that telephone advice is cheaper. That might well be the case, but if you dig into the statistics, it appears that the telephone advice system currently being run by the Legal Services Commission attracts different people from those who use face-to-face services, and possibly different cases. That information has been given to the Ministry of Justice in our response to its original consultation. It appears that telephone advice tends to be used more often by people who need information, although they get information. It also appears, for example—certainly in housing—that more people who receive face-to-face advice are rehoused or retain their homes than those who receive telephone advice. I suggest that that is because people ring about different issues.
The other issue relates to different people using the phone as opposed to face-to-face advice. It seems, as we pointed out in our evidence, that more non-white people use face-to-face advice on housing. It also appears that in relation to other benefits, 63% of users of face-to-face advice are disabled, whereas the equivalent figure for the telephone is 22%. I emphasise that when comparing costs, it is important to remember that they might well be different people and different cases, so they are not directly comparable.

Q 274

Kate Green: I want to go back to the discussion that we were having earlier about the changes that are going on in welfare benefits, housing and so on, and managing that transition. We have also got changes to child maintenance, which are likely to create another substantial period of need for advice. Indeed, I think that the Government acknowledge that in their own proposals. Can you give us any sense of the time scale during which that transition is likely to create additional needs and are you already beginning to see any effects, for example, in relation to the early changes in housing benefit that will come in this year?

Simon Pugh:  We are starting to see additional queries about housing benefit changes by the people affected by those changes, but I think that that will happen during the next two to three years as the various Bills pass through Parliament and come into effect.
One of the things that is a real concern for us is that with the combination of the Welfare Reform Bill, particularly the changes to housing benefit, and what is in the Localism Bill, in terms of discharging homelessness duties into the private rented sector and so on, there will be a lot more people with problems in the private rented sector who will need housing advice and housing help. The part of the safety net that is there for them—the legal advice—may well not be there in the future, unless and until they get to the point of being immediately at risk of losing their home. But in terms of dealing with poor landlords, landlord harassment, problems of disrepair and so on, short of people being at serious risk of harm to health, we will no longer be able to deal with all those early problems. During the next two or three years, there are likely to be more people pushed into the private rented sector, with changes to benefits and housing benefit going on in the background, and during that time it will be a real problem.

Q 275

Kate Green: Universal credit is beginning in 2013, but there will be a long transition period. Is that period of two to three years that you mentioned in relation to the housing benefit changes?

Simon Pugh:  Yes. And then there is more.

Q 276

Kate Green: Would anyone like to say how long they think we will be going through a period of heightened need in relation to other changes?

Gillian Guy:  The trends we are seeing at the moment are that the volumes of requests to us are increasing and continuing to increase, and we are trying to project that forward. The issues are changing somewhat and debt, housing and employment are beneath that, but debt and housing are the main issues.
Something that is quite alarming is the increase in inquiries from 16 to 25-year-olds about homelessness; they are threatened with potential homelessness or actually being made homeless. That is of particular concern to us. The time frame is probably more like seven to 10 years when we are trying to look at our projections, because there are many changes coming together. One of the things that we urge the Government to do across Departments is that, instead of doing individual departmental impact assessments, they should look at the cumulative impact that these changes will have on individuals and families. Then we can work with a whole assessment and we will be able to project what that demand for our advice will be.

Q 277

Ben Wallace: I have a question to put to R3 about CFAs and the points that you raised. I was just looking through your submission. How many of the current claimants whom you represent or who come to your practices need to use a CFA as a way of funding their case, as opposed to people who may just be part of very large corporations, or creditors seeking money, and who perhaps can just pay normal fees?

Frances Coulson:  The insolvency practitioner brings the litigation as a representative, effectively, for all creditors, and statute dictates how that money is distributed once it is recovered. If you take my earlier answer, a quarter of those creditors are the Revenue. Of course, there will be some larger corporations in there, such as utilities, British Telecom and so forth, but there will also be large numbers of smaller trade creditors, individuals and employees. As a body, those individual and trade creditors have already lost money and asking them to dig into their pocket again is difficult, particularly when a lot of this litigation can be quite complex and last a long time. I still have a case that we have had open for eight years now. We have recovered money and assets but one of the properties is owned by a Delaware company, and there has been a fake identity and so forth. So there can be a huge investment of time and energy to get money back for creditors.
On other cases, we are about to send a cheque for £700,000 to the Revenue from one case. It was not a fraud, but a mismanagement of the company. There are large sums that can be recovered. You cannot expect individual creditors to fund these things. They are done on risk by the practitioner and their lawyers.

Q 278

Ben Wallace: In Lord Justice Jackson’s report, he did not seek an exemption for insolvency practices, although he did in relation to clinical negligence. He talked about the fact that he expected legal aid for clinical negligence still to be carried on but, in your skilled area, he did not try to carve out an exemption. Therein lies the following question, which is about the success bid and a principle relating to your defendants. I say defendant because they are not all dodgy directors. There will be defendants or people from whom your creditors are seeking money, whose businesses just have not worked and who have gone bust for lots of other reasons. Is it right that a defendant—not a claimant or those creditors—pays a lawyer a win bonus or a success fee to compensate the practitioner or the solicitor for other cases that they may have elsewhere? Why is it right that it falls on the defendant to compensate for other areas as opposed to someone else?

Frances Coulson:  I do not think we are necessarily talking about cross-subsidy of cases. In an average litigation case, any lawyer will tell you that there is 25% litigation risk just because of the nature of litigation. The lawyer and the insolvency practitioner will have to pay their staff and certain statutory fees. They have to keep going because litigation can last a long time. That is the risk they are being paid for: the fact that they may not get paid at all on that case and that, in any event, they have to wait a long time for their money. In insolvency cases, it is not a matter of winning the case; it is actually recovering the money. I take your point, Mr Wallace, that it might just be a business that has failed through no fault of the person concerned. In fact, the insolvency litigation that we are talking about ranges from wrongful trading, which is trading at the expense of creditors when you should have known better, to put it in plain terms, through to fraudulent trading and that sort of end. You can take early advice if your business is in difficulties and you do not trade at the expense of other creditors because it knocks other businesses over. That is the problem.

Q 279

Ben Wallace: I do not dispute the risk—do not get me wrong—but you never know which practitioner has only good cases. In other parts of the law where you might see personal injury claims, there are solicitors who represent only the easy claim. They do not go for the risky area and certainly no one can assess that at the time. I do not dispute your risk in insolvency practice; it is the question of why that risk should be borne by a defendant in a case that may not be connected with the risk that you carry elsewhere in your business.

Frances Coulson:  The defendant will have had ample opportunity to settle matters early. In this sort of litigation, unless it is a fraud where you have to freeze assets because you cannot give them notice, there have invariably been investigations and interviews. There will have been letters before action and possibly a part 36 offer to give them an opportunity to settle early. There will also have been frequent offers of mediation. It is the wrongdoing of a defendant who fights and loses that causes the costs and the risk. The creditors will end up paying for that. In litigation, we are not just talking about the success fee, which may be negotiated up or down. Practitioners want to give a return to creditors, but they are taking a personal risk on adverse costs and they are not excused just because they are taking a representative action for creditors. That is a high premium. There is no reason why the defendant, who is the person who has committed the wrong at whichever end of the scale it is, should make the creditors pay for that.

Q 280

Yvonne Fovargue: Just a yes or no answer will suffice for this. The Government propose that the only access to legal services will be via a telephone gateway. Will that be appropriate for all the different client groups that you see?

Julie Bishop:  No.

Gillian Guy:  No. It will exclude people from seeking that advice.

Simon Pugh:  No. And it will exclude people.

Ann Lewis:  I agree with the others.

Frances Coulson:  I agree.

Philip Hollobone: That brings us to the end of the session. I thank our witnesses for coming along to give evidence. It is much appreciated. I am sorry that we did not get around to Mr Dave Watts’s and Mr Tom Brake’s second questions, but they can go first in the next session if they want to ask a question. We will now hear evidence from Liberty, Justice and the Legal Action Group.

Examination of Witnesses

Rachel Robinson, Roger Smith and Steve Hynes gave evidence.

Philip Hollobone: I welcome our witnesses to the Committee. In a clear, loud voice, can you say for the record who you are and who you represent? If you would like to make a brief introductory statement, you are welcome to do so. As we went left to right last time, we will go right to left this time, starting with Mr Hynes.

Steve Hynes:  I am Steve Hynes, the director of Legal Action Group. We are primarily concerned about access to justice and the general public. A few opening remarks: the Government are saying that legal aid has expanded beyond its original remit. We take issue with that and with much of what the Government are saying.
To give one example, 1984 was the largest expansion of legal aid in recent years, under Margaret Thatcher’s Government. That was the PACE Act, and nobody is talking about repealing it. On international comparisons, a lot of figures have been bandied about that are inaccurate. I can quote at length from Europe and New Zealand if need be. On rising costs, if you look at the figures, the last Government were actually quite successful at controlling costs. We took issue with the way that they went about it, but if you look at the cost of legal aid—particularly on the civil side, which is bearing the brunt of something like £280 million in cuts—it has been under control for about four years at least. The previous Conservative Government, of course, was successful in cutting back on scope, which was used as a blunt instrument for controlling costs at that time. I could go on, but no doubt Members will want to follow up with questions.

Rachel Robinson:  I am Rachel Robinson, a policy officer at Liberty. By way of a brief introductory statement, we have grave concerns about parts 1 and 2 of the Bill, the impact on access to justice for very vulnerable people and their potential to create a culture of impunity, not just in public authorities but in big business, in which victims cannot challenge wrongdoing, which obviously has wider social implications. As far as part 3 of the Bill is concerned, we take a different approach. We think that it is a largely sensible set of proposals.

Roger Smith:  My name is Roger Smith. I am the director of Justice. I will make three preliminary points. One is that, as you would expect, we are very unhappy with the cuts to eligibility and scope in the Bill. That is our particular concern, and you will be familiar with the arguments. Two, I think that the Bill itself is a bit of a dog’s dinner, to be honest. There are 24 pages of exclusions. I wonder whether that will be stable enough to establish so complex a situation. Three, we are concerned about the end of the Legal Services Commission and what we see as insufficient guarantees of independence in decision making.

Philip Hollobone: Thank you. I remind Members that this is a shorter session than the previous one. This session finishes at 3 o’clock, so we have 40 minutes. I will open the bowling with those who missed their opportunity last time, so we will start with Mr Tom Brake.

Q 281

Tom Brake: A part of the Bill that we have not discussed at all is the review of indeterminate prison sentences. What is your view of it, or what are you hoping will come out of the review?

Rachel Robinson:  Although we do not have a provision in the Bill, we certainly welcome a commitment to review these sentences. We have had real concerns about the use of indeterminate sentences for a long time. They are bad for rehabilitation, in that prisoners face a huge amount of uncertainty; they are unable to prepare for life in the outside world without knowing when their release date will be. We hear from our advice and information service, which takes queries from the public, that individuals are chasing courses and not being able to get on the courses that they want at particular establishments. They are therefore thwarted in their efforts to attain a certain release date. We think that these measures are very bad in cost terms; they have imposed a huge cost burden and they are very bad for rehabilitation.

Roger Smith:  We agree. They are wrong in principle and they set up a Catch-22 situation—you can get out to do a course, but if you cannot do a course you cannot get out. We welcome the review: we would welcome their demise.

Q 282

Tom Brake: To be clear, do you believe that there should not be any indeterminate sentences?

Roger Smith:  In the sense that I think you mean, yes, there is an issue about life in prison and what that means. If you commit a crime, you do the time: that is where we begin. Once you start meddling with that, there are real difficulties.

Rachel Robinson:  I would agree with that assessment.

Q 283

Dave Watts: I ask you to go to the nub of the matter. The Government claim that the present system is unaffordable and expensive when compared with systems in other countries. We heard the example of New Zealand, but it seems strange given that we do not have much in common with New Zealand. You said earlier that you could give us some comparison information. What do you feel is the most appropriate comparison, and how do we compare with some of the other countries that you have looked at?

Steve Hynes:  I look behind me because Lord Bach is sitting there and I do not want him to stab me in the back. He commissioned a good round-robin piece of research from Professors Bowles and Perry at York university in his time as Minister with responsibility for legal aid. I would not read the conclusions of that report or executive summary too closely, as it seems to be slightly filleted, but if you look at the report in its entirety, it gives a fair picture.
In a nutshell, in continental Europe, inquisitorial systems cost a lost less in legal aid, but you take the cost of the court systems and they come out as similar to the UK. It has to be said that the UK has big policy differences regarding criminal law, which means that we prosecute more people and imprison more people; that means more costs in the system. That, of courses, is a decision for Parliament. That means that we have more costs compared with many jurisdictions.
New Zealand is really interesting. Things are changing there. If Members are interested, I would look at section 114 of its regulations on legal aid—what they call legal services. If you look at that, pretty much in civil, you convert the New Zealand dollar, and it is much the same level of means test that we have—slightly over average income for the average family of NZD 30,000 or so a year, and they would be entitled to civil legal aid in New Zealand. There is a different spread of services and different types of law, so you cannot draw direct comparisons, but New Zealand overall spends about £20 a head; we spend about £38 on legal aid. It is a different legal system.
The other point that I would make in the common law world is that it is difficult to make comparisons, because you have state systems in the common law world. For example, Queensland in Australia is completely different from any other state there. Ontario in Canada—Roger knows it well—has a legal aid system, and a legal aid board, very similar to us. They spend less on crime, certainly. You look at that per head of population, you look at their civil system, and I would argue that it is a much better system because they deliver it through a salaried service. The parallels that have been drawn have been slightly misleading, to say the least.

Roger Smith:  The obvious comparator is Scotland. Ten or 15 years ago, the Scottish legal aid scheme was the same as ours and it has diverged. Some funny things have happened. They have retained legal aid for personal injury and they have just increased eligibility for it, to £30,000 from £10,000. How have they been able to do that? It has been a much better managed scheme, to be honest. They have avoided all the nonsense of CFAs, and they have made little adjustments on the tiller instead of going for grand gestures. In some ways, this Bill is in the tradition of the approaches by two previous Governments to legal aid. They made grand gestures: “We’ve got to do something big and enormous to get legal aid under control.” We have had all this franchising, competitive tendering and all these great things that were going to come, and the Scots have just made little amendments here and there—one or two salaried lawyers here, a bit of duty counsel there—and they have managed the system much better. It is a real criticism of how we have done it over two decades.

Steve Hynes:  Just to interject there, they do not have the very high-cost cases’ costs that we do. About 400 or so cases cost around £200 million a year. Of course, they come down here to our Supreme Court for that. Broadly, however, what Roger is saying is correct and it has got to be said—their scheme has been better managed, because it has been less politicised and there has been less tinkering with the scheme and less introducing of different management systems. That has led to more stability and a more stable market in terms of the supply base.

Rachel Robinson:  I just want to say briefly that I agree with a lot of what Steve said about the huge number of variables and the difficulty of making comparisons. In addition, Liberty believes that this is also a question about what kind of society we want to be. Successive post-war Governments recognised that access to free legal advice for those who cannot afford to pay is as important as access to free health care and free education, and we do not see the same sort of race to the bottom in those areas and we do not see an attempt to justify ever-increasing cuts against the spend of other countries, heedless of the social consequences.

Philip Hollobone: This is a tighter session than the previous session, so we will have to make it tighter.

Q 284

Elizabeth Truss: In answer to the question, “What kind of society do we want to be?”, I do not think that we want to be a litigious society. My fear is that the high legal aid bill is actually fuelling legal involvement in things where it should not be, such as the content of employment tribunals or the welfare system, where these issues could be easily sorted out using a proper appeals process.
I just want to come in on the point about international comparisons. The figure you quoted for New Zealand, which sounds more up to date, is almost double that of the UK. [Hon. Members: “Half.”] Sorry, the other way round. I do not think that it is right to compare the inquisitorial system. My question is about Canada. What are the income thresholds and what is the scope of cases that are eligible for legal aid in Canada? I ask that because it seems to me, when I have taken a cursory glance at these other systems, that there is generally a lower scope and lower income thresholds in those similar countries than there are here in Britain.

Steve Hynes:  First, we spend around £5 million on employment law. That is just for initial advice and some preparation. There is no representation in employment law—there never has been—although we have campaigned for it. We think that there will be further costs if people do not get initial advice in employment law cases, because one of the advantages is that you can tell somebody that they have got a rubbish case and they should not waste their time by clogging up the tribunal system.
On the Canadian point, in Ontario they certainly have a stricter means test on the criminal side.

Q 285

Elizabeth Truss: What is the means test? Can you give us a number?

Steve Hynes:  I cannot give you chapter and verse on the means test. I actually have that information in the office in the file.

Elizabeth Truss: It would be really helpful if you would send that.

Steve Hynes:  It definitely is a stricter means test for the criminal side. I have used one example—an anecdotal example. One of my colleagues over in Canada said, “Well, you get accused of a crime and you have property in Canada, you often have to get loans against your property”. I just do not think that this Government would want to go down that path.
The New Zealand example is very interesting. If you look at section 8 of their Legal Services Act, one of the criteria for legal aid is whether a person accused of a crime has had legal aid before. Again, I just do not think that that would be permitted in English law or European law.

Roger Smith:  Canada is a series of provinces, so it actually differs greatly between the different provinces. There is no doubt that eligibility levels are lower. Payment levels are lower. Ontario has just finished a major strike where counsel refused to appear in guns and gangs cases, rather shrewdly keeping up their other business to keep the income flowing. It brought the Government to heel, interestingly. Canada is not a very happy place. I think 20 years ago it was at the cutting edge of legal developments. Canada is not really there any more.

Rachel Robinson:  To reiterate the point, if we are talking about countries like Canada and Australia, there is huge variation between different provinces. I emphasise again the real difficulty, which has been acknowledged by drafters of comparison research, in making these kinds of strict comparisons when there are so many variables.

Q 286

Elizabeth Truss: It seems to me that on each variable the scope is wider, the income threshold is higher and the cost per head is higher in the UK. Whichever variable you look at, it does seem to be that we are at the high end.

Steve Hynes:  That is not true. The Bowles and Perry research does not say that. It says that in the Netherlands, which is a good example in Europe, they actually spend more on criminal. Look at the civil legal aid systems: ours has been diminishing in recent years, compared with other jurisdictions. It is no doubt the case that if you look at headline figures, particularly in continental Europe, we do spend more on legal aid, but that is because we have an adversarial system.

Elizabeth Truss: I said similar legal systems. I did not say inquisitorial systems.

Steve Hynes:  If you want the figures, they are here. Page 27 of Bowles and Perry’s report has chapter and verse. It does not have Germany, which is a federal system and spends slightly more. We spend €80, Sweden €71, Netherlands €90 and France €51. Germany is actually about €90 per head of population, but it is a bit more like a common law jurisdiction because it is has a federal system. So its costs are higher because it is analogous to a federal system like Canada or the common law world.

Roger Smith:  Canada is by and large cheaper, but there are twists to it. Ontario has a province-wide network of what we would call law centres, which is more expensive relative to its system than we would have. The basic point is right: Canadian services are cheaper, narrower and, frankly, less acceptable in terms of the quality that they give.

Rachel Robinson:  Also, we are talking about variations not just within the legal aid system, but outside of that in the justice system—variations in the complexity of legislation and in social circumstances more generally—which impacts on what you can read into statistics dealing with legal aid. You cannot just simplistically say, “Oh, there is a higher spend on legal aid; we are being wasteful.” There are lots of other things to consider and that is why there is a difficulty in making comparisons.

Q 287

Helen Goodman: I would like to ask Mr Smith some questions about the sentencing part of the Bill. You have been critical of the extension in the curfew requirements. I wonder if you could explain to the Committee why that is, since many people think that curfew requirements are a particularly efficient way of dealing with offenders.

Roger Smith:  I think our issue is about the length.

Helen Goodman: Yes, that is right.

Roger Smith:  It is not about the principle, in a sense. We are not arguing that you cannot have curfews, but if you are having curfews in the region of 16 hours a day, or whatever, we think that gets very close to being house arrest and therefore crosses a line.

Q 288

Helen Goodman: What line does that cross?

Roger Smith:  It crosses the line between an acceptable restriction of liberty towards creating what is more effectively described as house arrest.

Rachel Robinson:  While we recognise that extended curfews are less restrictive on liberty, for example, than a custodial sentence, Liberty has a residual concern. While we welcome many of the sentencing proposals, these kinds of extended community penalties may not actually be used in practice as an alternative to custody. They may be used in circumstances where custody would not be envisaged, and we have to make sure that we have proper safeguards in that respect.

Q 289

Helen Goodman: I am sorry, Mr Smith, I do not really understand the point that you are making. If you are making a linguistic point that you do not want something called house arrest, but you do want something called curfews—I think you are making a more fundamental point than that. I am not a lawyer and when I say that I do not understand, I really mean that I do not understand the point you are making.

Roger Smith:  What I am saying is that we are not against the principle of curfews, so you can keep somebody in their house for a period of time. I think that that has to be a proportionate, reasonable period of time. I think that 16 hours is too long.

Q 290

Helen Goodman: Is that because you think that for the kinds of offence that a person will have committed it is disproportionate? If you think that, presumably what follows is that you do not think anyone should ever go to prison. I am sure that you do not think that.

Roger Smith:  No. We feel that 16 hours is just too long. If it were shorter than that, it would be acceptable.

Q 291

Helen Goodman: Thank you. I want to ask you about what you have said about bail and where you think the adult bail provisions have gone too far. I take it that you mean you think there should be more reasons for remanding people to prison than the Government have included in their proposals.

Roger Smith:  I will have to write to you on the bail proposals because it was not me who did the work on that. I will set out our arguments in relation to bail in writing to you.

Q 292

Helen Goodman: You are very critical of the police being able to issue conditional cautions without reference to the CPS. Why does that worry you?

Roger Smith:  We are concerned about mission creep in relation to the police. The essential job of the police should be that of an investigator who obtains the evidence on the basis of which there is a prosecution. We are concerned about a mission creep, where they go beyond that to effectively giving someone a sentence. That is an unfortunate extension of role that is wrong in principle and potentially has practical problems if it starts to figure in the kind of negotiations that might occur between a police officer investigating a case and the suspect.

Rachel Robinson:  We also have grave concerns about the use of out-of-court disposals, and proposals to take prosecutors out of the equation exacerbate those. A moment ago, you also mentioned bail. I would like to acknowledge Liberty’s support for proposals that will mean that those who are unlikely to face a custodial sentence are not clogging up the prison systems in circumstances where it is not sensible. It is a common-sense proposal as far as we are concerned.

Q 293

Ben Wallace: May I go back to what Mr Smith said about the Scottish system? Steve Hynes was correct about the very high cost of cases. That mostly has a big impact on the Serious Fraud Office and down south. But the contention seems to be—this came across from both yourself and Mr Hynes—that the Ministry of Justice should be looking more at taking some money out of criminal legal aid. If there is money to find, we should be tougher on criminal legal aid than on civil. The Scots did save some money in that way. I have had meetings with academics from Scotland who have said that. But they have also found themselves in trouble in relation to Cadder and things like that, where the withdrawal of legal advice from the police station has landed them in hot water with the European convention on human rights and the courts. That aside, do you still think we should be looking at criminal legal aid and whether there is money to be taken from that?

Roger Smith:  I was making a general point that Scottish legal aid has been well managed in terms of the use of salaried lawyers here and there very strategically. We had a big experiment with the public defender solicitors operation that was set up to fail, and did. The Scots have been much shrewder about making small practical rather than non-political—

Q 294

Ben Wallace: They make tremendous savings because the prosecutor chooses the venue of prosecution. That in itself would save a lot of money, but I do not think we would get the removal of such trial rights through this Parliament.

Steve Hynes:  To answer the question, you could look again at fees within the system. Again, Lord Bach knows all about this. He reduced fees by 12% in criminal cases. The last one coming through in the current year was a stepped reduction. You could look at very high-cost cases again. Most members of the Committee will be aware of Sir Bill Callaghan’s letter of 7 February from the commission. He sets out some savings that could be made from criminal.
Also hanging in the air is competitive tendering. There is a split within the profession on that; quite a few of the larger firms believe that if they have the volumes of work from police stations to Crown court and High Court work, they would save money, of the order of 10%. You can probably say that it will be more than that. I warn that one danger is the potential for cartels. Indeed, when he was my predecessor Roger Smith did some work in North America on that.
Yes, you could look at criminal again. You cannot look at scope, obviously. You mentioned the case of Cadder. You can also look at fees, but there are two warnings. You can make savings, but it means consolidation in the market, lack of choice and the potential for cartels. Then you have the potential to lose excellence within the system. Lawyers will obviously tend to oversell themselves in terms of their excellence and their worth, but you can push and push and you will get to a stage where you may lose, particularly at the top end with the advocacy and other skills that you need.

Q 295

Elfyn Llwyd: The Bill creates a new offence of threatening an individual with a knife or bladed instrument, which would carry a mandatory six months’ imprisonment. What are the pros and cons of mandatory minimum sentences?

Rachel Robinson:  Liberty in general is very cautious about mandatory minimum sentences. However, in this particular example there is a clause that allows for judicial discretion in the interests of justice to come into the equation. We are not overly concerned because we think that flexibility is built into the system.

Roger Smith:  It is difficult to see why the offence is necessary; somebody carrying out the act will be committing other offences anyway. This is pandering to the public in the usual way. As a principle, mandatory sentences are a nightmare, because you would always find that a bad case comes up that makes them ridiculous.

Q 296

Elfyn Llwyd: Mr Hynes, do you have a view?

Steve Hynes:  I concur with what Roger Smith said.

Q 297

Elfyn Llwyd: We have heard before that the law was adequate in this field before. That may be something to do with the press, but we do not know.

Steve Hynes:  I have to comment. Would we be having this same debate if events that happened over the last couple of weeks had happened a month ago? The Lord Chancellor was pilloried by sections of the Murdoch press and we ended up with the Bill that is before us. Much of what was originally planned was along the right lines, but I gather that the other side do not agree with that.

Q 298

Yvonne Fovargue: I do not know whether it was the Legal Action Group that coined the phrase “advice desert”, but it certainly warned about advice deserts in the past. What do you think the advice landscape will look like if the proposals to remove social welfare law go through?

Steve Hynes:  I wish that the Legal Action Group had coined it, but it was James Sandbach of Citizens Advice, who, I note, was sitting behind us earlier.
The landscape will be decimated. On the civil side, our estimate is that we would probably go down to something like between 500 and 900 firms undertaking legal aid; in family, it will mean that pretty much in every parliamentary constituency you will have problems if there are conflicts of interest. I think you have already heard evidence about the not-for-profit sector.
The Government have got their impact assessment up to date. Around £60 million would be lost in what we call social welfare law, and the specialist end of Citizens Advice, 18 law centres, quite a few of the independents. We have produced a lot of data on this. In this month’s Legal Action magazine, we have an article outlining the effects on child poverty zones—where there is a high instance of child poverty, the top floor being in London. It is difficult to exaggerate how bad the effect will be.
To be devil’s advocate, the Government know that. It is in their impact assessment. The Lord Chancellor criticised Lady Hale for quoting from the impact assessment. As a matter of policy, the Government are saying, “We know the Bill will affect poor and marginalised communities, but we are going ahead with it, because we have to save money.” To be fair to them, they have been up front about that.

Q 299

Yvonne Fovargue: Access will be through a telephone gateway in future. Do you have any comments about the appropriateness of that for the range of clients?

Steve Hynes:  Oh dear. You have already had some answers to that. Telephone gateways can work and can complement a system of providers on the ground. We did an opinion poll in November last year to coincide with the consultation. It was an NOP piece of research that found that the people who are less likely to use the internet and telephone services are social group DE, and they are the ones who qualify for legal aid. There you have your answer. If you want a legal aid system that people do not use, deliver it through telephone advice, because the ones who pass the means test tend to be the ones who do not have telephones. The big issue with that is mobile phones and pay-as-you-go. Obviously, those in social group DE tend to have that type of mobile phone contract.

Q 300

Kate Green: I would like to ask Roger Smith to expand on something he said in his introductory comments on his concerns about the insufficient guarantees of independence in the Bill. I assume what you are talking about is the plan to take the key functions of the Legal Services Commission back in-house, as it were. Assuming that the Government are going to proceed with that proposal, can you suggest any safeguards that we ought to stick in the Bill?

Roger Smith:  Yes. There should be an independent appeals process. That is an idea that we have pinched from New Zealand, where legislation has just gone through and there is an independent appeals process. It wound up its Legal Services Agency in the same way that the Bill will do, but it provided an independent appeals process, which is the minimum that you need. What you are going to get is people—who may be politically motivated—wanting to judicially review the Lord Chancellor. They will be refused legal aid, so they will take judicial review against a refusal to give them legal aid for a judicial review, and that will spiral out. In a way, it is a gift, but if you want to close off people who will bring cases against the Department and make a fuss, it is the minimum you should do.

Steve Hynes:  I would make a plea to the Government to do something about that on Report. You have transposed the old section 20 of the Access to Justice Act 1999 into clause 33, and I again refer you to Sir Bill Callaghan’s letter of 7 February. I do not think that it gives sufficient protection. You need an internal ring-fenced system, whereby there is no chance of the Lord Chancellor or other Ministers interfering or, more importantly, being seen to interfere with decisions in individual cases. I think that that is a political liability for any Government, and you should not be putting yourselves in that position. Roger is right: the minimum should be an appeals system. You do not need an expensive tribunals system; you can adapt what you already have and have review panels or set something up. That is a plea to look again at what you have, because I do not think that clause 33 will achieve what you want it to.

Q 301

Andy Slaughter: May I ask you about clause 12, which provides the possibility for the directors about whom we are talking to set merits and means tests in relation to the police station advice? What are the views, particularly of Liberty and Justice, on that?

Steve Hynes:  We have already had good signals from both the Minister and the Secretary of State that they will look at that again. I hope that, on Report, the Government will bring something forward to repeal or withdraw those provisions. I was amused by the Secretary of State’s performance on Second Reading, when he blamed the Opposition for it. Clearly, it might be their fault, but he is in government and I gather from the Minister that you will look at that again, which we are encouraged by. The case of Cadder has already been mentioned. It is a given that we need to retain the police station advice that we have.

Roger Smith:  It is also a requirement of the European Court, which was what the Cadder case was about. We intervened in Cadder, so we have some responsibility for the case, which requires the Scots to have a duty solicitor scheme that they have not had so far. The problem is that if you do not see a solicitor and get advice before you are interviewed by the police, what you say in that interview may not be admissible in court. I hope, in that light, that policy will remain as it is now and that the Bill will be changed. What is more important is what actually happens.

Rachel Robinson:  I can also voice Liberty’s concerns in this respect. This clause, like many others in the Bill, gives the Lord Chancellor powers in secondary legislation to do potentially very damaging things. While we have had assurances that there are no immediate plans to introduce means and merits testing, this remains a possibility and that is very concerning—from a justice perspective and, as others have said, from a practical perspective—as well as being unworkable. We will have people escorted into custody and then an attempt to make a means assessment without any of the available documentation to make it possible.

Q 302

Andy Slaughter: In our previous session, we asked about some of the specific scope areas, so I think I ought to give you the opportunity to say whether there are any areas we are removing from scope that give you more concern than others. Clearly, we will be looking at many of the specific areas in Committee, but it will be useful to discuss them while you are here today.

Steve Hynes:  Thank you for the friendly question. I would say particularly social welfare law and, for the practicalities, I cannot understand the logic of the Government deciding that repossession should be the criterion for a housing case. You have a situation of litigation not being prevented: people have to get to the stage of repossession before they get legal aid to spend in court. It makes eminent sense to me, and to most thinkers in this field, that you get early advice—housing advice or housing benefit advice—before you ever get to a property being repossessed. Looking down those areas, they are very common areas of law which affect ordinary people up and down the country. I think it makes sense to retain them because although you can argue about the economics, ultimately, the state and the private sector save money.
We were disappointed that the Government did not look at alternative methods of funding which we think are out there and could be looked at. The Government already have an alternative method of funding: it is called the legal aid impact test. It has not been changed in policy. Money is transferred within Government when legislation is shown to have a legal aid impact—family credit introduction led, I think, to about £30 million being transferred from the Department for Work and Pensions. It would make sense to give that sort of market-based inducement for Departments to get their decision making right first time and to save a lot of problems, mainly for people at the sharp end of legal disputes.

Roger Smith:  You could take the view that the Government are going to make these cuts broadly and that there is nothing that any of us really can do about that, except perhaps here and there. I am not dissociating myself from what Steve is saying about the broad picture, but if you are looking for one potential winnable issue, I would say it is clinical negligence. That is the most vulnerable issue for the Government—people with catastrophic injuries, or birth injuries and defects—and you will get major publicity coming down the line, while the cost is relatively small. The logic is incoherent—they were exempted from conditional fee arrangements for very good reasons in the first place. Were you to ask what I would concentrate on as the one winnable issue, my answer would be clinical negligence.

Rachel Robinson:  If I can sketch out one overarching category of concern, it is where the proposals in the Bill will place many individuals who challenge decisions of public authorities, whether of a Department or more widely. They are going to lose their practical ability to do make such challenges. We are concerned that that will have a real impact of constitutional significance and will, to some extent, change the relationship between the individual and the state. We know that public authority problems, in the standard of decision making in Departments such as the Department for Work and Pensions or the UK Border Agency, already impose burdens of their own on the legal aid system. As far as Liberty is concerned, these measures, rather than trying to deal with the underlying problem of the poor quality of administrative decision making, will just prevent people from challenging decisions, which is not the right way of going about it and cutting waste out of the system.

Q 303

Andy Slaughter: I was going to ask about clinical negligence, bringing in part 2 as well as part 1 of the Bill. It was put earlier, I think by Elizabeth Truss, that it would be better to improve the quality of Government decision making, as you would not then need to spend money on legal aid. You may want to comment on that. What do you mean by greater constitutional significance? I see what you mean in relation to being able to review the decisions of corporate bodies. What do you see as the overall impact on access to justice of the Bill as a whole?

Rachel Robinson:  There is an overarching rule of law point here. The idea is that everybody is subject to the law. That does not just mean the fact that there are laws in place that are, in theory, applicable to all; it means that people can vindicate their rights. People have practical access to justice. When I talk about the constitutional argument, I mean equal access to justice, and nobody being above the law and not having to face the consequences of their administrative failures, for example. That is the specific point that I was seeking to address there.
Overall, the impacts of parts 1 and 2 on access to justice will be huge. Liberty is extremely concerned about proposals in relation to conditional fee arrangements and after-the-event insurance. We think that that is another example of a situation in which victims are going to be unable to challenge very serious wrongdoing and, in the case of conditional fee arrangements, wrongdoing by very powerful multinational companies, such as in the Trafigura case. This will have an impact not just on the individuals involved in a particular dispute, but on the culture: how decisions are made in big business and whether considerations about human rights and due process are taken into account by those who have a lot of power.

Roger Smith:  The phrase “access to justice” drives me mad. It is completely meaningless. Chipped on to the architrave of the United States Supreme Court is “equal justice.” That is the phrase that the Americans use. I take that to mean that, in any dispute between two institutions or people, the result will be determined by the intrinsic and inherent worth of the arguments, and not by the relative money and resources that each has. That is what is really important. The Bill threatens that in a variety of ways. One thing that we do not have time to explore now is in relation to divorce. Poor people and women will be shoved into mediation. Rich people and men, predominantly, will have the luxury of having lawyers. You had a discussion earlier about mediation. Mediation is a really good thing. Mediation for one is mediation for all. You could exclude all lawyers from the divorce court so that Prince Charles and Princess Di do not get one, either—everybody does mediation. But the Bill is a mess because some categories of people will not get lawyers and will be shoved into mediation, and others will get what they will see, probably rightly, as a better service.

Q 304

Tom Brake: May I take you back to a different part of the Bill, on conditional cautions, about which you have expressed great concern. Can you set out any safeguards that you think could be put in place to address, or partially address, your concerns about those?

Roger Smith:  Consultation with the prosecutor.

Rachel Robinson:  Absolutely.

Q 305

Tom Brake: Does that not do away with the immediacy of the conditional caution?

Roger Smith:  It provides what I would say is the minimum acceptable check. It could be a phone call, but some measure of check from another person in another agency—in the prosecution agency.

Rachel Robinson:  As things stand, if the Bill passes in its current form, a police officer will be acting effectively as investigator, prosecutor and judge. That is a matter of huge concern. We have seen a recent report by the Her Majesty’s inspectorate of constabulary that talks about inconsistency in different areas in the use of these protections. We have concerns about maintaining open justice and ensuring that justice is both done and seen to be done by the wider community.

Philip Hollobone: That brings us to the end of our time for this session. I thank our witnesses very much indeed for giving up their time to give evidence to us today. Thank you very much indeed. We will now hear evidence from the NSPCC, the Children’s Commissioner for England, the Local Government Association and the Standing Committee for Youth Justice.

Examination of Witnesses

Barbara Esam, Councillor David Simmonds, Dr Maggie Atkinson and Enver Solomon gave evidence.

Philip Hollobone: I welcome our new witnesses. In a moment, I will ask you to introduce yourselves. Unless any Members can tell me differently, I am sitting here on amber alert for a Division in the House. If a Division does occur, the knives in terms of timing still apply, so we lose that time from this session. Unless anyone can tell me differently, what I propose to do is to invite Members to ask questions one question at a time, so that as many Members can ask a question as possible. If the worst comes to the worst, we will have to suspend for the Division. May I ask our witnesses from left to right starting with Mr Solomon to say who they are and who they represent?

Enver Solomon:  My name is Enver Solomon. I am director of policy at the Children’s Society and I am here in my capacity as vice-chair of the Standing Committee for Youth Justice, which is a membership body that provides a forum for nearly 30 organisations—primarily non-statutory sector organisations—that are working to promote the welfare of children who become engaged in the youth justice system. We advocate for a child-focused youth justice system that promotes the integration of children into society and that is premised on recognising the rights of children and getting their voices heard.

Dr Maggie Atkinson:  I am Maggie Atkinson. I am Children’s Commissioner for England and I am charged with promoting, protecting and ensuring the delivery of children’s rights under the UN convention on the rights of the child in all aspects of policy that affect their lives.

Barbara Esam:  I am Barbara Esam. I am a solicitor with the NSPCC in the policy department.

Councillor David Simmonds:  David Simmonds. I speak for the Local Government Group. I am also deputy leader of the London borough of Hillingdon and serve as a magistrate in the London borough of Brent.

Q 306

Alex Cunningham: This question is for Mr Solomon and Dr Atkinson. Are children properly protected in the justice system in the light of the legal aid cuts?

Enver Solomon:  From our perspective in the standing committee we focus primarily on youth justice. The legal aid reforms are particularly of concern in relation to the children’s rights perspective. We are particularly concerned about decisions that have been taken on what remains out of scope. We—the Children’s Society—asked for data from the Ministry of Justice in relation to legal aid representation for under-18s. The data that were given to us show that nearly 990 cases will remain out of scope. That is 5% out of scope for legal aid representation, and 5% of cases for the most recent data for 2010-11 is £8 million. We are talking about saving a fraction of the total spend here. The majority of that is in relation to clinical negligence, which accounts for about £6 million.
The point is that we believe in the fundamental right to representation for all children under 18. Recognition has been given that children in family law are not able to represent themselves, but there seems to have been arbitrary decision making about whether or not children can represent themselves in other elements of law. There is a principle here that we particularly feel strongly about. There needs to be a differentiation between children and adults. The impact assessment does not make that differentiation. The Government have approached this reform with a desire and speed for legislation that is premised on an economic imperative, not a principled imperative that recognises that children are fundamentally different developmentally and are unable to represent themselves as adults. Access to justice and issues of equal justice need to be seen differently for children than for adults.

Dr Maggie Atkinson:  I would add to that. We are bound not only by the international and national articles that are quoted in the Bill, but by the European Union’s guidance on child-friendly justice from last autumn, which makes it clear that children are in and of themselves already vulnerable as a population. As witnesses in the previous session indicated, legal aid is almost always concentrated on those who are least able to fund their own access to legal redress. We are concerned that young people who are leaving care and who do not necessarily have access to the resources that they might need to set themselves up independently are out of scope—young people who have experienced criminal injuries, including abuse. Particularly, young people left severely disabled in cases where there are contested issues of clinical negligence may live a long life, and they have a right, under the United Nations convention, to the best possible quality of life and to a system that does everything in their best interests, irrespective. Therefore, as Children’s Commissioner, I am concerned.
I must point out that I am speaking only about England. There is a commissioner in Wales, who will no doubt talk to you about the Welsh situation if you wish to. It is important that we understand that litigation in person by a child is completely inappropriate in a court system that, even in family law, remains adversarial rather than inquisitorial. Such children are already vulnerable. Many of them are already damaged, and the lack of access to legal aid seems to us to be another insult.

Q 307

Elfyn Llwyd: The Bill will introduce a new offence of threatening an individual with a knife or bladed instrument in public or on school premises. It will carry a mandatory six-month sentence. However, that will not apply to under-18s. Do you think that it should apply? If so, why? Obviously, there is a prevalence of such offences among young people unfortunately; the Bill even mentions school premises. What is your view on whether that six-month sentence should apply to under-18s?

Councillor David Simmonds:  This is a personal view, expressed from experience as a magistrate. My view would be no. We go to great lengths in the courts to try to ensure that young people are not sent to prison unless that is the only available alternative. The figures on sentences of prison for breach demonstrate that in many cases, where an offence of that nature has been committed, the courts try to give another chance to the young person. If they make the best of that chance and reform themselves, they will not find themselves back in the court. However, if they breach the order, a prison sentence will be activated. That discretion should remain.

Enver Solomon:  I would back that up. The purpose needs to be about proportionality. That needs to be one of the key factors in determining a sentence. I do not see a need, and the standing committee will not support the approach of a mandatory sentence in such a case. As my colleague said, from his experience as a magistrate, I think that that view will be supported by other magistrates. The options available to the court to deal with children who get involved in serious knife offences are sufficiently robust and can result in sufficient custodial sentences if the case merits.

Q 308

Elfyn Llwyd: Are you saying that there is no need for the provision?

Enver Solomon:  There is no need for a mandatory requirement of a custodial sentence.

Q 309

Elfyn Llwyd: But the offence itself? Are you saying in any way that the offence itself is not necessary?

Enver Solomon:  No. I am not.

Q 310

Elfyn Llwyd: But you said earlier that the law was sufficient.

Enver Solomon:  I am saying that there are other categories in relation to possession and to acts of violence that might apply to current cases that would come under that offence category.

Q 311

Robert Buckland: I want to explore alternatives to conviction and to the usual range of sentences for young offenders. The Bill contains reference to conditional cautions and other alternatives. In that context, the value of restorative justice has been demonstrated by a number of young offender teams across the country. What is the view of the panel as to the future role of restorative justice with regard to young offenders? How do you see that aspect of sentencing or alternatives to conviction rolling out in the years ahead?

Dr Maggie Atkinson:  May I take this first, on a general basis, and entirely based on the evidence that we collect as the Office of the Children’s Commissioner? Whenever we speak with young offenders and those who work with them, there is a great deal of solid evidence, as you said, that restorative justice approaches not only work for victims and offenders but can be a really solid mechanism for turning round the lives of young offenders.
Our recent report launched in this building, “I think I must have been born bad”, points out strongly that there are always at least two victims when a young offender offends. The first is the victim of the crime that young offender commits, but the second is almost always the young offender. Huge percentages have very special needs, with real family issues and background difficulties and all sorts of mental health problems.
A restorative justice approach seems to be one of those things that you can and should use with young people, because it is multi-agency and because it almost always involves mental health and physical health professionals as well as those in the justice system itself. I was in an about to be reopened newly refurbished local authority secure children’s home only last week, where restorative justice programmes are at the heart of what they will do when they move those young people into a fantastic new setting that will help them turn their lives around. More importantly, when they leave, it should leave them able to call on what they have learned from restorative justice the next time they are faced with the temptation to commit an offence. That is the real fruit of restorative justice when it works well, for the offender as well as for the victim.

Enver Solomon:  I endorse that point. Many members of the Standing Committee believe that there is robust evidence to support the use of restorative justice. You only have to look at Northern Ireland. I know that the Minister has been there to see the conferencing model in operation. The Prison Reform Trust, which is a member of the Standing Committee, has produced a robust report outlining the beneficial outcomes in relation to a reduction in reoffending, where restorative justice is used effectively in the conferencing model.
In relation to the Bill, we welcome the loosening of the restrictions on the use of the referral order for children, which I am sure you are aware includes a restorative element. We hope that guidance will ensure that it becomes a more restorative process with higher levels of victim involvement than at present. We believe that it should be extended to cases where a child is convicted after trial, provided that following the conviction they admit their involvement in the offence and agree to abide by the referral order. We are supportive of what the legislation is doing with that element of restorative justice, and would argue that it could be taken further.
In terms of out-of-court disposals being used as a first-tier option, the restorative element is very much focused around the police and the delivery of restorative intervention is part of a conditional caution. Again, we are supportive of that, but the critical element will be in the delivery, the implementation and the resourcing, and also who implements it.

Q 312

Andy Slaughter: The Government continue to set out their proposals for reform of probation services. This week, they announced the outline but not the detail of their competition strategy for non-custodial services. There are already significant cuts to probation, and particularly to youth offending teams, yet there is a lot in the Bill in relation to young offenders and additional requirements being put on to those teams. Does that seem to you to be a problem? What are your observations? What are your concerns about the way YOTs are working?

Dr Maggie Atkinson:  I was a director of children’s services before I took this job, and the youth offending team was part of my remit. They do fantastic work, particularly the preventive teams, but they do not do that work in isolation.
Local authorities and their partners are becoming ever more creative as the savings and cuts bite for them; they are using people who are not in the youth offending teams but who meet the same young people to do some of the diversionary community-based, community payback and restorative community action work that the youth offending teams might previously have carried out entirely on their own. There are also a lot of preventive strategies at work in schools—almost mediation and restorative approaches within the school setting that can stop a youngster beginning to offend in the first place.
Any YOT manager would tell you that their mission in life was to put themselves out of a job, because they want to reduce offending by young people. I recognise that cuts are biting; something like 18% was the last figure I saw for reductions in funding for youth offending teams. This is therefore not something that you can simply pass to a well-meaning but ill-trained volunteer, lest anyone think it is. People working in youth offending teams are very specialist indeed, and they are multi-agency. It is about how those localities meet that challenge without letting young people fall into risky behaviours, and being offended against as well as offending. I imagine that the Standing Committee has other things to say, as would colleagues.

Enver Solomon:  Our committee includes the Association of YOT Managers. We know from them that the picture in relation to YOTs is changing. We do not have clear information. In some local authorities, YOTs are being merged with other reforms or structures. In some areas, a discrete head of the youth offending team or the youth offending service is being taken out and they are being led by someone who has additional responsibilities. There is a changing picture. We know that youth offending teams as constructed under the Crime and Disorder Act 1998 will change significantly over the course of the next few years. The notion of having a discrete multi-agency team whose primary purpose is to deal with crime prevention and reducing offending and reoffending will undoubtedly change. We will not, in every single local authority, have a discrete team with that focus and purpose. As a result, the delivery of youth justice and the resource, capacity and specialism associated with it will undoubtedly change.

Councillor David Simmonds:  It is a brief point, but restorative justice is generally a lot cheaper than custody. In my own experience, when we saw a reduction by a third in the number of people from a borough going into custody, the cost of that reduced dramatically as well. The envisaged provisions to transfer full responsibility to local authorities, which would mean that the full financial picture was held in one place, would enable us to see more clearly the benefits of doing that.

Q 313

Andy Slaughter: Does that mean, Councillor, that if savings are generated, because youth custody levels have been falling substantially, you want to see them reinvested in schemes such as community payback or restorative justice?

Councillor David Simmonds:  Yes.

Q 314

Elizabeth Truss: I want to return to legal aid, and specifically the scope for children in the legal aid system. My understanding is that 95% of what is currently covered by legal aid will be covered by legal aid for children under the proposals. Issues that were previously out of scope of the Bill, such as special educational needs, have been brought within scope. The 5% of cases that will no longer be specifically provided for under legal aid are mainly cases of clinical negligence, which can be covered by CFAs. In some of the most complicated cases, there is also an exceptional fund, at the judge’s discretion. Is it not the case that all children in difficult circumstances will be able to find recourse to justice through the legal aid that has largely been preserved, or through CFAs or the exceptional fund?

Barbara Esam:  No, I do not think that that is the case. We are very concerned about the number of cases where vulnerable children are involved in family proceedings that will not fall under the scope of legal aid any longer. We are particularly concerned about the effect that will have on the increase in the number of litigants in person who are appearing in court and the result that it will inevitably bring, which is huge delays in an already overstretched court system.
We noticed the information that the Ministry of Justice has put on its website in relation to a literature review of litigants in person. It is almost the strongest argument against the proposals in the legislation for cuts to legal aid for family proceedings. The review goes through the research, which indicates that litigants in person experience a number of problems that impact on the court. Those include the fact that they are unable to understand evidential requirements, and that they have difficulty with the forms they have to deal with and with identifying relevant facts. According to the MOJ’s literature review, they are often overwhelmed by the procedural and oral demands, and they have difficulty explaining their case. The review also goes through the impact on case outcomes and most of the evidence indicates that case outcomes are adversely affected by lack of representation. We are very worried at the NSPCC about the negative result that the lack of legal aid will have, therefore, in relation to these cases.

Dr Maggie Atkinson:  You will know that both my predecessor, Professor Sir Al Aynsley-Green, and I have been concerned, as the Office of the Children’s Commissioner, and indeed involved in changes to issues to do with children and young people in the asylum system. We were asked, under my powers, to intervene by a legal representative in the case of a child and a family. I will briefly tell you about it, if I may.
A foreign national, imprisoned on very serious charges and then further detained under the immigration rules, had three children. One was a 16-year-old who was almost at the end of her GCSEs and who had made a life for herself. The children were living apart from the mother and each other in different sorts of local authority care. When the Government decided to deport the mother, they included every child in the family within that deportation order. The 16-year-old expressed the view that having made a life for herself and being about to sit her exams, she should not be made to go and she did not want to go. We intervened. Had we intervened under the Bill as it is currently formed, and should it become law, she would not have had recourse to legal aid of any sort and nor would the family. As asylum seekers, they had no other recourse to public funds.
Unfortunately, the case went through and was lost, but that is not the point. The point is that as a very vulnerable young person who had already been through the trauma of her mother being both a criminal and a failed asylum seeker, she would not have recourse to legal help. She spoke English as a second language and there are all of the things that have just been summed up. That is only one example, but there are many, many more.
When Lord McNally spoke about this issue in the Lords, he made the very encouraging statement that wherever possible children and young people would be given legal aid. That is absolutely welcomed; I welcome that very strongly indeed. But it is how you define “wherever possible”.

Q 315

Helen Goodman: One of the proposals in the Bill is to increase the fine for breach of a youth rehabilitation order to £2,500. Do you think that the courts will have the common sense not to use that, or do you think there could be some adverse impacts and if so, what might they be?

Councillor David Simmonds:  My view is that the courts are unlikely to impose a fine where they believe that it is inappropriate. In my lengthy experience of such things and of all different types of offences, it is very rare that a court seeks to impose the maximum fine unless there is clear evidence that it is both justifiable for the offence and affordable by the perpetrator.

Q 316

Helen Goodman: There is not really any point in having a law that cannot be used, is there?

Dr Maggie Atkinson:  It seems that we are in the area of one of those escalator things—a technical term. Somebody is brought before the bench for a minor matter and a fine is imposed; the fine is not paid and it becomes a criminal matter. The person does not turn up and it becomes a further step up the ladder of the criminal matter. Before you know where you are, you have somebody who is out of scope of the magistrates court and is suddenly somewhere in a higher court in the land, because they did not pay a whatever-it-was fine. That includes things like school truancy and goodness only knows what else. I think that we need to be very careful, and raising the fine to that level would be one of the things that would almost put the system at odds with itself. I think that David has just summed that up really well. I do not know what the Standing Committee thinks.

Enver Solomon:  From our perspective, it is just grossly unrealistic that a child or young person would be able to pay the sum of £2,500. In our briefing on the Bill, we said that the fine could be capped at £250. But there is a broader point. There is an extension of adult provisions—this is one of them—to apply to children that are wholly inappropriate. The other two, if I may draw your attention to them, are, in clause 67, the extension of curfew requirements to a maximum of 16 hours per day for up to 12 months, and in clause 69, the extension of the maximum period of the youth rehabilitation order to three and a half years. These are essentially extensions of adult provisions, applying them to children, that will not in any way impact on reducing reoffending or promote youth rehabilitation.

Dr Maggie Atkinson:  I support that. [Interruption.] I am coughing again.

Philip Hollobone: I call Tom Brake.

Q 317

Tom Brake: Taking advantage of that choking, may I bring us back to restorative justice? First, a general question about whose responsibility it is to ensure that restorative schemes are up and running, because provision is patchy although the advantages seem to be enormous. Secondly, we had an interesting debate this morning about what types of offences might sensibly be dealt with in a restorative justice context; mediation is clearly that. I would be interested to hear whether in your experience there are types of offence that young people have committed where victims will never agree to have restorative justice-type arrangements in place.

Councillor David Simmonds:  I can make some observations although I am not a legal expert. I have found generally that what one might call environmental crimes—graffiti, vandalism and that sort of thing—generally have a positive response to restorative justice. For a young person who has been graffiti-ing property to spend time cleaning it up and talking to the property owner about the consequences has been quite helpful. I suggest that for certain categories of crime such as sexual crime or crimes of violence, victims are by and large not keen to engage in restorative justice—not always, but generally they would not be keen.

Q 318

Tom Brake: And the general point? Who should be pushing for restorative justice schemes?

Councillor David Simmonds:  In response to the provisions in the Bill about local government holding the ring on this, I think that given what we are seeking is a situation in which the lower cost of restorative justice is of benefit in a broader sense, provided that those costs and benefits sit with local government, local government should hold it. Equally, you could transfer that provision to the probation service or any other part of the system; but it needs to be in one place.

Q 319

Dave Watts: May I take you back to the scope? Many of us are surprised that clinical negligence is not included in the scope. We have heard from previous witnesses that it is unlikely that many solicitors will want to take the cases on, bearing in mind the high up-front costs incurred and the chance of not receiving any fees whatever. We have also heard that in the Bill there is discretion for the judge to break away and to grant bail. Do you understand that? Are you clear about the grounds that would enable a judge to recommend that legal aid was provided in such a case?

Dr Maggie Atkinson:  I do not know enough of the detail, but I will make one general comment, which is that everyone who has shared evidence and briefing notes with us finds it difficult, bureaucratic, cumbersome, slow and likely to be at least as expensive to administer as to find the money.

Q 320

Robert Buckland: May I come back to an issue that I think was raised by Mr Solomon, the extension of YROs? I think you made the point fairly but I want to press you somewhat. We are dealing with potential extensions of term, for example if there has been a failure to adhere to requirements within the three-year period. What is being proposed is really an extension of discretion by the court to impose an extra term, if there had been a failure to comply with a condition during the three-year period. It is not a simple question of inflation, in terms of allowing a court to impose a three and a half year period at the beginning of a sentence; it is all about the potential to give the court leeway to impose a further term if insufficient progress has been made by the young person or if there is a breach.

Enver Solomon:  I think you are referring to clause 66, which covers allowing the court to impose repeated further periods of supervision for breach of a child’s detention.

Robert Buckland: I think clause 69 is the one. That is YROs as opposed to detention and training orders.

Enver Solomon:  The point here is what will facilitate a reduction in reoffending and promote rehabilitation. The evidence is very clear from criminological research that, for young people under 18, sentence length does not act as a deterrent. The length of sentence does not make a difference. What makes a difference to a young person is what happens to them in the course of their experience in the youth justice system. If they are given opportunities to engage in education, training and skills, if an approach is taken that addresses the factors behind their offending, and if, critically, there is resettlement support for that young person on leaving custody—there was a recent report by Her Majesty’s inspectorate of prisons, which was, quite frankly, damning about the nature of resettlement support, an issue with which we have been trying to get to grips for many, many years and we are still failing to do so—those are the elements that determine whether a young person will return to the community as a law-abiding individual. Those are the critical elements. I do not think that an extension of sentence length will address that. I would never argue that one should make excuses for breach, but there needs to be discretion and a proportionate response to breach. We need to recognise that young people, critically, learn by making mistakes. Unless we recognise that, we will not facilitate their rehabilitation.

Dr Maggie Atkinson:  I would like to make the point that one has to realise that, while three years, three and a half years or any period in an adult life is a bit of a blink of an eye, in the mind and life of a child it is a very long time. I think Enver’s point in his earlier contribution was much more about the fact that if you allow a Bill to pass into law that treats children as if they were just cut-down adults and applies adult strictures in a child-specific setting, you are not guaranteeing their rights. You are not creating a system that is child-appropriate or child-specific.
This is a very complex measure, obviously, because it layers legal aid, sentencing, young people, children and adults all in one big piece of legislation. It will be difficult to implement if you are not very clear about what you mean by a child. For example, clause 109 mentions under-18s and under-17s. There are elements of the Bill that say a child is under 18, but the caution is for those under 17. I really think that you have an opportunity to create a measure that is very clear about what you mean by different age groups and how they should experience the system. How they experience the system when they are children may well stop them being adult offenders, if we can get it right. The Bill has been trailed as a very big opportunity to change things for the better.

Q 321

Kate Green: I would like to follow up Enver Solomon’s point about treating children like adults in relation to curfew. I think you expressed concerns that curfew provision was being read across to children, with the potential for their receiving curfews of up to 16 hours. What, specifically, are your concerns about the impact and risks to children and young people of that provision in the Bill?

Enver Solomon:  There are several issues here. Children who are subject to a curfew and children who get caught up in the youth justice system are often from particularly vulnerable backgrounds where there might be family conflicts, particularly domestic violence, abuse or neglect. We know that the overlap between children in the youth justice system and those who have experienced abuse and neglect is very clear. A curfew of that length has the potential to trap them in a home where they are already experiencing abuse, neglect and the consequences of domestic violence. In addition, their opportunity to participate in education and other positive rehabilitative activities would be severely limited by such lengthy curfews, which also have the potential to exacerbate any mental health problems or communication difficulties that they might be experiencing, and to limit their capacity to receive support for special educational needs, and so on.
There is also a further risk of ratcheting up with the provision. It is the escalator effect that was mentioned earlier. Sentencers might fail to use it to divert children from custodial sentences, so it might not be used as an alternative, but instead will apply longer curfews to children who might otherwise receive shorter ones. There will be a net-widening effect instead of its being used as an alternative disposal. I have outlined a number of concerns that I think need to be taken into account in particular in relation to this provision.

Q 322

Kate Green: What solutions would you like to see in the Bill?

Enver Solomon:  We need proportionate curfews, and curfews combined with support packages. Anyone who works in a youth offending team will tell you that it is no good just slapping a curfew on a young person if you are not going to give them a package of support to address their needs holistically. If you just give them a curfew, and hope that somehow that will address the reasons behind their behaviour, that is unrealistic. Of course, there needs to be proportionality, but we must recognise that we cannot just apply curfews to children and expect them to change their behaviour; we need to apply packages of support as well.

Q 323

Andy Slaughter: The Bill gives more responsibility to local authorities in relation to children who are remanded, and that may be welcome in some parts of the criminal justice system. Is it welcome to local authorities and, assuming that it is in principle, from the practical point of view are there resource implications, and how will the courts and local authorities respond?

Councillor David Simmonds:  The question can be answered in two parts. The principle is broadly welcomed by local government. We already manage quite a large proportion of that work anyway. It will make the whole position much clearer for all concerned for it to be in one place.
When it comes to the specifics, as always the devil is in the detail. In the case of my authority, 64% of young people who are remanded or in secure accommodation are aged 17. They are groups of young people who are classified not as juveniles by the courts, in which case there would be another disposal, but as young people who are legally adults, but are treated in a slightly hybrid way under the current system. I think there is a question about whether it is appropriate for the full local authority care system to be applied to all young people who find themselves remanded.
I had the experience of a young woman in court who had committed a violent crime, which had resulted in her being estranged from her family. The key issue was whether she would be able to go home to her family. The answer was yes, but that was discovered after the court had decided that she had to be remanded because there was nowhere else for her to go. In that situation, is it appropriate for that young woman to be subject to the whole process of care?
The Children and Young People Now organisation estimates that an additional 3,000 children across all the different age groups will come into the care system in the UK. Clearly, that is a costly prospect, so there is our usual concern about ensuring that the funding is adequate. When it comes to the technical operation of secure accommodation, we need to ensure that Prison Service secure accommodation is sufficiently flexible to take account of needs.
At the moment, the nearest secure accommodation to my authority in west London that provides secure accommodation in the Prison Service is in Bristol, and that means that any social worker carrying out their duties under the various care provisions must go to Bristol. The planning for a young person’s return to their family, their local area, and to education, which may be in the space of a few days in some cases, must be done from Bristol. If the prison service decides for technical or practical reasons that it must move the young person to HMP Deerbolt in County Durham, our social workers must go to County Durham to do that work. There is an issue about ensuring that the practical side of the system is geared up to deal with young people who are subject to the normal care services provided by councils.

Dr Maggie Atkinson:  There is a broad welcome from across the sector for the notion of moving towards a more care-based system. You will know that something like 45% to 50% of those who are currently remanded in young offender institutions and other settings are actually on remand. Many of them are never found guilty and are released, but they are locked up on remand, so we welcome moving to a more care-based system.
As has just been pointed out, the devil will be in the detail of the implementation. At what point do the provisions of the Bill trump the Children Act 1989, which has detailed and already legally binding strictures on local authorities as to what a child in need is, what a child in care proceedings is and what a care order looks like? If you mean section 20 of the 1989 Act, you need to say that on the face of the Bill, otherwise you will have local authorities thinking, “Do we have the right accommodation? Do we have secure beds? Do we have the right trained staff? If someone commits the offence over there, is he ours or is he theirs?” The devil will really be in the detail. The principle is welcome—tremendously—but be careful what you wish for, if you do not get the detail right.

Enver Solomon:  We fully endorse the principle and we fully endorse proposals that children remanded in custody should be given care status. My understanding from officials is that they will have section 20 care status. I agree with Dr Atkinson’s point that it is important to make that clear on the face of the Bill.
There is an important principle in what the Bill is trying to do with the use of remand. The Standing Committee has a reputation for always being overtly critical of Government in what they are trying to do with custody. Here, we want wholeheartedly to support what the Bill is trying to do about the use of remand for under-18s. The number of children remanded in custody is almost double the number of adults remanded in custody. There is an overuse and an inappropriate use of remand for children. Half the children who are remanded in custody are either acquitted or given a non-custodial sentence. We have wasted vast amounts of taxpayers’ money on needlessly locking up very vulnerable children for short periods on remand.
The Bill will introduce a very clear barrier to the use of youth detention and a very clear incentive to use local authority accommodation. As I understand it, it will incentivise local authorities to use resources to respond to children who come to court facing remand decisions. When a decision has not been made to grant bail, local authorities will be incentivised to support those children in the community, where appropriate, while setting down very clear parameters about what has to be met for the use of secure custodial remand. Any young person who is a threat to the community or who has committed a severe violent offence would still be remanded in custody. We welcome measures that will, we hope, dramatically reduce the needless use of custodial remand for many children.

Philip Hollobone: If Helen Goodman has recovered, I invite her to ask the last question.

Q 324

Helen Goodman: Thank you. I just want to ask whether there is anything that is not in the Bill that you would like to see in it.

Dr Maggie Atkinson:  You would expect me to say this: I would dearly love to greet the first measure that overtly and explicitly quotes the articles of the United Nations convention on the rights of the child.

Councillor David Simmonds:  I tend to agree with that proposal from Dr Atkinson.
Two things would be helpful. If section 20 of the Children Act 1989 and the Children (Leaving Care) Act 2000, which amended some of the 1989 Act, apply to all young people who go into remand, the cost of providing that care will increase exponentially. Due consideration will therefore have to be given to the full cost implications of that and whether that is what the Government and, specifically, Parliament intend.
I would very much welcome clarity about precisely who is responsible in law. In the situation, which was cited by Solihull council, of a family that relocated to Solihull after having real problems in Brixton, and from which two young men, both under 18, had committed murder within a month of arriving, who is responsible? Is it the court in Birmingham, and therefore Birmingham local authority, where the case was heard? Is it Solihull, where they briefly resided and where the offence was committed? Is it Brixton, in the London borough of Lambeth, where they had originated? As a magistrate in Brent, I can say that we hear cases from all over London. Is it the local authority where the person lives?

Philip Hollobone: Order. I apologise for interrupting Councillor Simmonds but we have to stop at 3.45. I thank all four witnesses for giving up their time and giving evidence to us today.
We will now hear evidence from the Association of British Insurers, the Association of Personal Injury Lawyers and Action Against Medical Accidents.

Examination of Witnesses

Nick Starling, Muiris Lyons and Catherine Hopkins gave evidence.

Philip Hollobone: I welcome our witnesses to the Committee. Thank you for coming along this afternoon. In a moment, I will ask you to introduce yourselves to say who you are and who you represent. I remind the Committee that this session is due to end at 4.30. We are still on amber alert for a Division in the main Chamber. Should a Division be called at 4.15 or afterwards, I will invite the Whip to move that the Committee be adjourned. Let us start right to left with Catherine Hopkins.

Catherine Hopkins:  I am Catherine Hopkins. I am legal director at Action Against Medical Accidents, which is a UK-wide charity that campaigns for patient safety and justice.

Muiris Lyons:  I am Muiris Lyons. I am the immediate past president of the Association of Personal Injury Lawyers. We are a not-for-profit organisation of around 5,000 lawyers who act for those who are injured through no fault of their own.

Nick Starling:  My name is Nick Starling. I am director of general insurance and health at the Association of British Insurers, which represents the interests of the UK insurance industry.

Q 325

Yvonne Fovargue: Catherine, what sort of injuries do you deal with through AvMA?

Catherine Hopkins:  We deal only with people who are injured in the course of health care and that could be anything in a health care setting. We have a helpline that is open to the general public. Injuries can be any sort, from self-limiting injuries where surgery has gone wrong and somebody has made a recovery within a few months, to a birth injury where a child faces a lifetime of severe disability.

Q 326

Yvonne Fovargue: What percentage of people who come to you are children? If these reforms go through, what percentage of those would not be able to be dealt with?

Catherine Hopkins:  We are extremely concerned about the effect of the loss of clinical negligence from scope, particularly for children and for people with serious and persisting injury. We do not see conditional fee arrangements as a viable alternative, despite what is often repeated. We do not see them as being particularly viable now under the present rules, but it will be more so in the future.

Q 327

Tom Brake: I want to consider a slightly different aspect of clinical negligence. What would be your view about the impact of a statutory duty of candour in terms of professional staff reporting a medical accident. What is your view about the potential of that to cut down on litigation?

Catherine Hopkins:  It is possible that it will cut down on litigation in some circumstances. People feel that they have a duty—and it is quite right that they do—to know what has gone wrong in hospital. Occasionally, people bring civil claims to find out what is wrong, but you could not bring one just to find that out. People will bring a civil claim only if they have physical or psychological damage, which is compensateable through the civil court system. It is unlikely that anyone would bring a claim to find out what went wrong, because there is no remedy there; it is simply to get disclosure. I do not think that that will have a huge impact, although it is highly desirable.

Q 328

Andy Slaughter: You talked about CFAs. What sort of people bring CFAs? What would be a typical CFA case?

Muiris Lyons:  Almost anybody can use a CFA to bring a case, which is one of the real merits of the current regime. It provides access to justice for literally everyone. The key is that it provides access to justice to those who cannot afford to bring a claim in any other way. Particularly in the fields of personal injury and clinical negligence, for which people are not eligible for legal aid, that is the only route of access to justice, unless they happen to have the benefit of before-the-event legal expenses insurance.

Q 329

Andy Slaughter: Do you have any figures? If you do not have them here, you can write to us, by all means. Part of the reason I ask is because you hear about people who can afford to bring litigation in their own name using CFAs, because they find it convenient for some reason. I am interested in what the income and background are of people who bring CFAs.

Muiris Lyons:  Noted cases, which appear on the front pages of newspapers, include that of Naomi Campbell. However, that is the exception. By and large, no win, no fee agreements and conditional fee arrangements are used by ordinary people who would otherwise be unable to afford redress or compensation. I am a clinical negligence practitioner in practice myself, and for those clients of ours who are not eligible for legal aid, almost all cases are run on a no win, no win basis.
Our concern is that the current proposals are a double whammy for such clients. Those who are eligible for legal aid will no longer be able to access legal aid, and those who bring a case through a no win, no fee agreement will face having to pay up to a quarter of their compensation in legal costs. That seems fundamentally unfair and wrong.

Nick Starling:  I cannot make a great observation on the sort of people who bring CFAs at the moment, except to say that our member companies deal with people who have been injured or made ill through no fault of their own. We fundamentally agree that in any system, it is essential that people who have been in that situation—a car accident or a workplace accident—who have got an injury when it was not their fault, get quick and proper redress. That is fundamental to our approach. That can be through the legal system or outside it, but that is fundamental to our approach. We believe that the package of reforms that Jackson has proposed, some of which are under scrutiny in the Bill, will improve and enhance that system, reduce its cost and increase its speed and effectiveness.

Catherine Hopkins:  As an organisation, we strongly disagree with that position. Any litigant who has to bring a claim financed by a conditional fee arrangement will be worse off than they are now. There are two extremes. The first is the case of a brain-injured child. Less than 10% of the damages that are awarded to a child, even if the damages run into millions of pounds, represent pain, suffering and loss of amenity. Most of the damages represent losses consequent on that child’s injury. Yet, those in themselves are not always enough to cover the cost. In our submission to the consultation on the Jackson reforms, we provided case studies that showed that the general damages element—pain, suffering and loss of amenity—is needed for the children to supplement their accommodation costs. Without that, their damages will not pay for the adapted accommodation that they require.
In any event, the past losses are not the child’s; they are usually owed in trust to that child’s parents, who might have spent five, 10 or 15 years providing free care for the child. Although most parents are generous and do not immediately ask, “Which bits of the damages are mine?”, it is not the child’s. Yet, both general damages and past losses are available up to the cap of 25% for a deduction. We believe that that will leave a severely disabled child in a worse position; much worse than they are currently. Furthermore, if you look at the squeezed middle of our society—the people that Muiris just talked about, on average incomes of £30,000, £40,000 or £50,000—they could not afford to bring a claim without a conditional fee arrangement and are not eligible for legal aid. If your injury is self-limiting and you are recovered in two or three years, but you lost a significant amount of income, 25% of your damages—all of them if you do not have future damages—could be taken towards a success fee. Take a self-employed plumber: a chunk of the damages will be his loss of earnings and he will never get those back because they will be deducted under the conditional fee arrangement. People will be left at a serious disadvantage.

Muiris Lyons:  There is a broad point, which is that the whole premise behind the package of reforms that with which this part of the Bill is concerned is addressing disproportionate costs, stemming from Lord Justice Jackson’s report. But of course, as you will all know, the Ministry of Justice has been overseeing a very successful pilot that was introduced for road traffic claims up to £10,000, which has fixed costs for those cases: £1,350 plus a 12.5% uplift. Up to 75% of all personal injury claims are now in a streamlined, fast-track, fixed-cost process. That has addressed the issue of disproportionate costs in three quarters of all personal injury cases. I should add that I know the Ministry are currently consulting on extending that scheme to cover other personal injury cases, which may take the figure as high as 90% to 95% of all personal injury cases.
We are left with the really difficult, complicated cases. Industrial disease, clinical negligence, catastrophic injury—those are the sort of cases in which clients will find it very difficult to find a lawyer to take on expensive, difficult litigation on their behalf. If they lose those cases, they will find it very difficult, and in the absence of legal aid they will find it very difficult to bring those cases where legal aid will otherwise be available.

Nick Starling:  I want to distinguish between catastrophic injury claims and the more straightforward ones. Our members are less involved in clinical cases, but they deal with massive motor claims—catastrophic claims there—and it is absolutely essential that people are compensated according to their needs. That is vital and needs to happen. I would merely make the observation that the 25% limit is not a target; it is an absolutely maximum that lawyers can take. It need not necessarily be taken.
Looking at the vast majority of straightforward claims I think that that is where the problems in the system lie; they attract disproportionate costs. We now have an extremely simple motor portal system that requires very little input. Liability is usually determined very easily. As Muiris Lyons just pointed out, the £1,350 fee for that—£1,200 plus VAT—is utterly disproportionate to what must happen. We think that a fundamental part of cleaning up the system is a substantial reduction in those fixed fee costs. I know that that is not in the Bill, but it is an important part of the whole system of reform. If you reduced these fixed fee costs, the problem of referral fees—which we would also like to see banned—goes away because it would not be worth people’s while to pay a large sum of money to get an even larger sum in costs.

Q 330

Andy Slaughter: I can see why you might think some of the proposals in the Bill are helpful or favourable to your members, Mr Starling, but you said that they were better for claimants as well, if I understood correctly. We have heard from the other panel members about the up to 25% that may be taken from meritorious claimants’ damages. I appreciate your point that clinical negligence is not principally what you deal with, but the submission on legal aid by the NHS Litigation Authority said:
“We have serious concerns over the proposal to withdraw legal aid from clinical negligence claims”
and it questioned whether CFAs are likely to be available to fund many of the more serious claims currently brought by legal aid. So there are concerns—even from defendant bodies—not just that this may not be fair on claimants because of the new CFA damages-based agreements, but also that the cases simply will not get to court. Is that right?

Nick Starling:  I thought that that question was addressed to me. Was it specific to me, or was it to anyone?

Q 331

Andy Slaughter: It was, but I would welcome the view of the others as well.

Nick Starling:  When our members are dealing with claims, the fundamental issue is liability. In the great majority of claims, liability is relatively straightforward to establish and quite a lot of the issues then are about what actually has to be paid in terms of compensation. Our members are used to dealing with catastrophic claims; they deal with them all the time. We have seen no evidence that has demonstrated that this will affect people’s ability to take forward cases or that lawyers will be any more reluctant to take forward cases. If someone presented us with that sort of evidence we would be happy to look at it, but there is no evidence as far as we can see.
When it comes to the lower-value claims, I would defy anyone not to know that they can make claims because they are surrounded by people encouraging them to do so all the time. We understand that people might have concerns about access to justice, but we have seen no evidence that this will make it more difficult. On the contrary, we think that we need a system that is quicker, more efficient and cheaper, because we are all paying our premiums, which fund these things. That would be to the benefit of everyone. A great deal of people have before-the-event insurance anyway, particularly for motor claims, which they can then use under those circumstances.

Catherine Hopkins:  The key difference has been illustrated by Mr Starling, when he said that liability is not a difficult thing. That is quite the opposite in clinical negligence. If someone is run over on the crossing outside, everyone here will be able to tell whether or not that person was injured by a car and whether the car was being driven negligently. That is not the case in medical negligence. Apart from a pregnant woman who is going into hospital to deliver a baby, when people go into hospital they have something wrong with them, so if they come out still with something wrong with them the cause may not be negligence; it could be something else. That means that a lot of work has to be done on liability and causation. It is not straightforward and cheap to investigate clinical negligence claims.
The other thing that I would say is that practically no claims are worth less than £10,000. If they are, they are not really brought. Under legal aid requirements—the cost-benefit requirements—you would not get a certificate for a client with such a low- value claim—a claim for less than £10,000. Occasionally, there are difficulties along the way and the damages are lower, but your initial valuation must be much greater.
In a sense, therefore, we are talking about different issues here. We are talking about the biggest claims with the most complicated issues on causation and liability— mostly causation—and currently they are virtually all legally aided. It is such a glib thing to say, “Oh, well, they can all be CFA’d.” You would be asking firms such as Stewarts, which already do a large amount of conditional fee agreements, suddenly to take a chunk of the biggest, most complicated cases into their conditional fee agreement management system. That will mean funding up to £100,000 worth of disbursements. I know that there is a concession on the insurance, but you are actually talking about firms carrying an overdraft for those disbursements. We do not have a remit for lawyers, but we recognise that lawyers have got to remain in business in order to provide access to justice for our clients, who are former patients. We worry a lot about this. Many of our members say they will not be able to afford to take catastrophic injury cases on conditional fee agreements.
My phone rang all morning on 21 June, when the Bill was published, with people I know who are our panel members and who work at relatively small local firms, particularly in the north. I think that the north will be more affected. Muiris’s firm is a largeish firm and it has a Leeds office; it is fairly unusual for the larger firms. There is one other. Those people ring, saying, “Well, we do CFAs. We do CFAs for the slightly lower-value cases. We do all our catastrophic injury clin neg cases on legal aid and I don’t think my partners will accept that extra burden on the firm of three or four years of building up work in progress and being unable to bill it.”
Access to justice is going to be a significant problem. I talked earlier about if the case runs and is successful, but I think that actually finding a solicitor who can say to a young mother with a child with brain injury, “Yes, I will take your case on from today, on a conditional fee agreement”, will be like finding hen’s teeth in some areas. Others will say, “Yes, if you can deposit £3,000 with me to cover the cost of the initial investigation, I will do that—you might risk losing that money, but when I have got the initial reports from, say, an obstetrician and a paediatrician, minimum, I will tell you whether my firm will take it on under a conditional fee agreement.” I think that is the problem.

Q 332

Dave Watts: Is not the problem with medical negligence that we are looking at a wide span of different conditions and different issues to be redressed? You just talked about, for example, a child that was severely brain damaged. If the case was to be taken on, lots of up-front costs would be incurred before the solicitor would know if there was a case or not. I think we were referring to some of the minor cases in which you think there is not a problem. We have heard from previous witnesses that CFAs would probably not be available, and you have repeated that just now. Is there then likely to be a growth in insurance policies? Would your members see a growth in people wanting to take out an insurance policy against that, if they were going into hospital? What would the cost be for someone who wanted to do that?

Nick Starling:  I would have thought that was unlikely. It is not something I have thought about. I do agree that, to some extent, we are talking about very different situations. As I said, our members do deal with catastrophic injuries—they are not really the kind of problems that we are trying to address by the Jackson reforms. By definition, they have to be dealt with over a long period of time, they cost a lot of money—the legal fees are much more proportionate to the amount awarded—and that is a slightly separate issue for our members.
The big issue for our members is the huge amount of low-cost bodily injury claims, for example the £2 billion-worth of whiplash claims, by far the greatest in Europe. I do not know the extent to which there are low-cost clinical claims, but we are all familiar with the advertisements we see in hospitals inciting people to make them. Our issues really are with the lower-value claims where the costs are, quite simply, too high. People are encouraged to come forward—I think the words of Lord Young were “incitement to litigate”—and that leads to large numbers of exaggerated and in some areas certainly fraudulent claims. That is where the reforms will be instrumental in getting the costs and such claims down, so that the genuine claims—coming back to my original point—of people who have been injured or they are ill and it is not their fault are dealt with quickly, so people get proper, speedy and correct redress.

Q 333

Ben Wallace: May I ask all three witnesses the question about liability to which Mr Starling referred? Do you think that the claimant and the claimant’s lawyers have some liability for the claims that they make—the success or failure? Should they carry some liability?

Muiris Lyons:  In terms of if their claims are successful or unsuccessful—

Ben Wallace: Yes. The costs of the case.

Muiris Lyons:  The key point with all litigation is who has responsibility for it. As a report by three leading cost judges pointed out very recently, the main costs should be put at the door of defendants who drag cases out, deny liability unnecessarily, try to settle at the end, very close to the court door, and then complain about being penalised in costs because they chose to conduct litigation that way.

Ben Wallace: To defend themselves—

Muiris Lyons:  They are entitled to defend themselves if they have got a defence, but if they say, “No liability”, and then two years later, “Oh, okay, we are liable”—they play a numbers game, and it is an attritional strategy that works very well when you take a global look at the numbers.
The difficulty for claimants is that we have got to do the best for our clients—nothing pleases me more than when a defendant admits liability early on, because I know then that those expensive issues are resolved at an early stage and we can get on to sorting out what this client needs to help improve his life, his independence and his quality of life. Those are the key things that the debate ought to be about, whether the levels of damages are enough to do that. The Law Commission reported 10 years ago that damages were too low and recommended an increase of 50%. That has never been introduced. We are now talking about taking 25% off current levels of damages to fund these reforms. Claimants will pay 25% of their legal costs to subsidise the person who injured them in the first place.

Q 334

Ben Wallace: Can I hear from Catherine Hopkins about the issue of liability?

Catherine Hopkins:  Lawyers already do incur a liability in terms of costs because if you take on a case on a conditional fee agreement, you risk being paid nothing. There is already that. If you take on a case on legal aid and you fail, the costs paid to a solicitor under legal aid are considerably less than the inter partes costs, so there is still a risk there, although it is smaller. There is probably a much greater risk if a solicitor is a bad judge of risk and takes on lots of cases on legal aid that all fail. Even if they fail at the first hurdle, which is the initial investigation, they risk losing their legal aid franchise, so it is not without risk already.

Q 335

Ben Wallace: But some of those risks will be mirrored by the defendant. The defendant will go through the process of thinking, “If I defend this, it’s going to cost me money just to start the process.” Although you talk about some of the severe clinical negligence cases, which are 5% of the total market of litigation, 95% are not clinical negligence. We talk about personal injuries and Mr Lyons’s examples of industrial disease, but all the falling down in cracks and minor industrial disease was left out. The “Where there’s blame, there’s a claim” and ambulance chasing stuff is all out there driving up costs. That is a very large part of the civil claimant market that is impacting on my constituents’ insurance policies and businesses. One of the reasons they get hammered is through the success fee, which is why I wanted to ask about liability.

Philip Hollobone: Order. May we have a question, Mr Wallace?

Q 336

Ben Wallace: Yes. Rupert Jackson refers to the success fee, which is a win bonus. One of your members, Mr Lyons, had a website that described it as a win bonus for solicitors for winning a case. But the defendant, who may have no liability in other cases, has to pay to compensate that lawyer for having unsuccessful cases elsewhere. Do you think that it is a fair principle for a defendant that he or she has to compensate a lawyer for cases that are not linked to that defendant? Why should they? What have they done wrong to have to pay for your claims elsewhere that may be bogus, unsuccessful or claim farmed? I am interested in your view about why we should continue the success fee.

Philip Hollobone: Quick answers and then we will move on.

Muiris Lyons:  I will be as quick as I can. They do not have to pay for bogus or fraudulent claims. They are paying those premiums only in cases that they have lost and where they have insured somebody who has been found to be liable or negligent. It is a simple premise. It is the insurance premise of the many paying for the few. The idea behind it is that the success fee on the winning cases allows firms such as mine to take cases that are unsuccessful. When they were first brought in, success fees were calculated to be revenue neutral. The idea is that, across a basket of cases, lawyers do not make extra money; they just make enough to cover the losses.

Ben Wallace: But that is not the case—

Philip Hollobone: Order. No, Mr Wallace, we carry on. Nick Starling, anything to say?

Nick Starling:  May I quickly say that one of the problems is that it is all of us paying for the many, rather than just the many paying for the few. I emphasise that we are not talking about the very high-end difficult cases that Ms Hopkins has talked about. We have a dysfunctional system, in which people play in dysfunctional ways. We need a system that ensures that when liability is there, it can be dealt with very quickly. If people play the system—if they take unmeritorious cases forward or if defendants spin things out—there should be ways of penalising them for doing so. We need everything that encourages the system to work smoothly and effectively and quickly. It is that dysfunctionality that Jackson tackled and that we need to strip out of the system.

Q 337

Alex Cunningham: Many people agree that the compensation culture is getting a bit out of hand. We talk about it being dysfunctional, but surely insurance companies appear to be keen to encourage their clients to seek damages. They inquire very kindly after them and then check for accidents. I do not know whether that is a policy to try to see off the no win, no win people or not. It strikes me that the question is whether their proactive approach is not as much to do with growing a compensation culture as that of the no win, no fee merchants, who spend a fortune chasing ambulances.

Muiris Lyons:  First, the Government’s report by Lord Young last year said that there was no compensation culture—that is Lord Young saying that. Secondly, on the increase in claims, broadly speaking, the number of claims in employer liability and public liability is falling. It is only in road traffic accidents and, recently, in clinical negligence, that claims are starting to go up. Whether that is down to third party capture or assistance by insurers—their payment of referral fees and so on—is an entirely different matter. That issue is not part of the Bill, which I think is about whether clients who have legitimate claims can get access to justice, and whether it is fair for them to pay up to a quarter of their damages in legal costs.

Nick Starling:  The question was put partly to me, so may I answer that? There is a compensation culture. It may not be absolutely widespread throughout the UK, but in parts of the UK, if I go into the back of your car, you are three times more likely to make a personal injury claim than in other parts. In some parts there is an expectation that you can make a claim, and we need to sort that out. I do not intend to do so, but if I were to run into the back of your car, your car might be out of action—it might need repairs and you might need a replacement vehicle. You might have an injury and it is really important that you are helped quickly. That is what you should expect. I am liable; you should be helped and you want people to come to you. It may well be that my insurer will come to you direct and say, “Can we sort you out?” That is what is called third party assistance.
We are all familiar with referral fees—they are a symptom of how the system has gone wrong. Insurance companies pay referral fees, and the firm that picks up your vehicle and the garage might pay them. Jack Straw has alleged that the police and the NHS pay referral fees—everyone is at it. It is not part of the Bill at the moment, but it is vital to ban them. We also need to cut off the fuel supply to them, which is the excessive cost to the system.
There is some simple arithmetic. You can charge £1,200 for a simple road traffic accident cost and you can pay £800 for the referral fee to get that £1,200, so you make £400 for a relatively straightforward claim. Let us get rid of the referral fee—the £800—then we can reduce the costs. If they were £400, everyone would be happy.

Q 338

Alex Cunningham: There would probably be lower insurance premiums as a result.

Nick Starling:  We must tackle some of these big issues, such as the £2 billion cost of whiplash claims—one in 140 people in this country make a whiplash claim every year. I do not believe that people in this country have the weakest necks in Europe; it is simply inconceivable.

Muiris Lyons:  We have had a fixed cost regime in place for a year and my insurance premium has not come down.

Nick Starling:  Last year, motor insurers made an overall loss of £2 billion. You can work out a bit of simple arithmetic there and that is what is pushing premiums up. It is a very competitive industry. If we can strip out the unnecessary costs, sort out the problem of whiplash and deal with the claims management companies that are inciting people to make claims, insurers will compete with each other and premiums will come down.

Catherine Hopkins:  There is no compensation culture in clinical negligence. Not only does Lord Young say that in his report, but so does the NHS Litigation Authority. If you look at the number of adverse incidents reported in the NHS compared with the number of claims issued, the proportion—I do not have the figures, but I can provide you with them—is enormous. It is less than 1%.

Q 339

Tom Brake: Mr Starling, I want to ask you a question, which I think you have answered. Your view is that an appropriate fee for an RTA would be in the order of £400 or £500. Is that what you are saying?

Nick Starling:  I was not making a formal suggestion. I was just saying that there is a simple piece of arithmetic—that it is worth people’s while to pay an £800 referral fee to get a £1,200 fee for an RTA. I was just saying that you can do a simple bit of arithmetic that works out what a more appropriate fee might be.
I know that there is a similar situation in Germany, where the fee is around €300 or €400. It is much higher in the UK than in other countries. I am not here to dictate what that fee should be. I am just saying that there is scope for it to be much lower. That is a symbol of success. The portal has been a huge success. It has sped up the claims below £10,000. Sometimes, they are dealt with in hours rather than days or weeks. The amount of input that is needed does not need that sort of fee to sustain it. If lawyers are not having to pay the referral fee to get the business, they should still be able to make a decent living out of it.

Q 340

Damian Hinds: Not everything that Lord Young said was greeted with universal approval. As for the point about there not being a compensation culture, excluding the relatively small amount of complex medical negligent claims, if you watch daytime television—not that I do—it would be difficult to reach the conclusion that you and Lord Young have reached. Do we know the size of the advertising market in that regard?

Catherine Hopkins:  It would be interesting to see whether there is a correlation between advertising and the number of successful clinical negligence claims. It is probably likely that it results in more telephone calls to solicitors saying, “I think that I’ve got a claim. Will you listen to my story?” The firms that keep stats will say that they perhaps take on one in 10 cases. That does not necessarily mean that they will succeed; they will take them on to investigate. I was in private practice as a clinical negligence solicitor for more than 10 years, and we would listen politely to most calls and say, “Sorry, there isn’t a case that we could take on here.” There may be a perception, but actually the cases do not proceed.

Q 341

Damian Hinds: I was suggesting that, if it were not a profit maximising activity, people would not be spending money on the adverts. Whatever the calls-in to cases-taken ratio, I am sure that it is relevant, but it does not change the argument that there must be greater prevalence of such things to justify all the spend.

Muiris Lyons:  In his report, Lord Young recognised that, with the prevailing advertising, there was a perception of a compensation culture. But, broadly speaking, the figures show that claims are falling, not going up. It is important to recognise that. From my perspective, if there are concerns about advertising and referral fees, fine—address them directly. Taking a quarter of an injured innocent claimant’s damages is not the way to do it, nor is withdrawing legal aid from some of society’s most vulnerable people.

Nick Starling:  I do not know what the advertising spend is, but we do know that there is a very strong correlation between the location and density of claims management companies in particular parts of the country and consequent bodily injury claims, particularly minor bodily injury claims. In some parts of the country and in particular areas of activity, such as motor, there is a compensation culture. That is undoubtedly so, and anything that can be done to strip out the propensity to claim—Lord Young used the words “incitement to litigate”—is extremely important.

Q 342

Elfyn Llwyd: I do not accept that. Your claims are going down. You may say you are talking about your sector, but generally there is no compensation culture. I speak as a lawyer myself. Going back to Mr Hind’s question, if there were a compensation culture, why would they need to advertise?

Nick Starling:  We have an extremely good road safety record in this country. Last year, there were below 2,000 deaths, which is a great improvement. But our members have not seen it, because they constantly see an increasing number of personal injury claims. I come back to the fact that many of them are minor bodily injury claims, and we think that there is a compensation culture.
To finish that comment, I am not including the large catastrophic claims in all this. We deal with a lot of them. There is a particular problem of catastrophic injuries with young drivers and their passengers. I am not including those in my remarks, but focusing on the lower value, the exaggerated, the fraudulent.

Muiris Lyons:  But the measures in the Bill will impact most significantly on those types of cases. That is the real difficulty.

Q 343

Andy Slaughter: Mr Starling, you have made some sweeping statements. I wish to put some of them back to you, if you do not mind. The big advertisers are the insurance companies. One insurer alone spends more than £180 million on advertising, including things like BTE insurance, which you would put as an alternative once you have got rid of ATE insurance. You say that there is a compensation culture, and that there are too many claims, many of which are fraudulent, but almost 95% of people who claim are either making a first or a second claim. You do not have a large incidence of serial claims. You also say that insurers are not making profits. Some are. Admiral is a top 10 insurer that is making very healthy profits. I asked them why and they said that it was because they manage their business and their claims very well. Are you not possibly making excuses for inadequacies in your own industry?
It seems to me, and this is the main point that I should like to put to you, is that you are saying that if you have a very straightforward claim where liability is clear, then you do not need a lawyer. The insurance company will make an offer. We have been given examples where the initial offer made by an insurance company is then beaten by it when the claimant gets a lawyer six or sevenfold, which implies that the insurance companies are not always being entirely even handed. You would not expect them to be. What happens in those cases where someone is going to pay for meritorious but marginal cases? Should it be the claimant out of their damages if they succeed? Should it be the NHS which may have to pay for their health care costs or the Department of Work and Pensions? Or should it be the tortfeasor’s insurers at the end of the day? What do you think is fair in social terms?

Nick Starling:  I think what is absolutely fair is that insurers pay valid claims where there is a clear liability and someone has been injured or made ill when it is not their own fault. I have made that clear throughout. Our member companies compete fiercely. They advertise. I have noticed that other companies in other sectors advertise too. That is generally accepted as a way to win business. Also, without commenting on the profitability or otherwise of some of our members, in any realm of business, some are more successful than others. That is just the way that business works. You say there are lots of examples where lawyers have got a substantially larger settlement. I can point to many examples where the original claim has gone down substantially. We can all argue on the fringes about particular cases. In a dysfunctional system people tend to behave in dysfunctional ways. If we can sort out the system, if we can streamline it—

Q 344

Andy Slaughter: Why is it less dysfunctional for the claimant to have to pay from their damages than for the insurers to have to pay?

Nick Starling:  Jackson did a package and he compensated for that by increasing the general damages so that the whole thing works properly. He accepted that there were changes and the way that general damages increase—I do not believe that is in this Bill—is important. The insurance industry has always said that you need to take Jackson as a package. We have not tried to cherry-pick the bits we like. It would have been very easy for us to have said, “We like the cost shifting and so forth but we don’t like the general increase in damages.” We need the whole package as a whole to come in. Some of that is in the Bill and some of it is outside.

Q 345

Andy Slaughter: Would you therefore appreciate the retention of legal aid for clinical negligence, which is what Jackson suggests?

Nick Starling:  Our members do not deal with legal aid issues so I cannot comment on that. I can comment on the fact that a lot of people have before the event insurance and we are keen to encourage a better take-up and better awareness and understanding that people can use before the event insurance. That relates to motor insurance in particular.

Philip Hollobone: Two minutes to go and Catherine Hopkins is itching to come in.

Catherine Hopkins:  Sorry, I was, but now I have suddenly lost my train of thought.

Muiris Lyons:  May I make a quick interjection while Catherine recovers her train of thought. The 10% increase in damages was Sir Rupert’s suggestion to offset the losses that would be incurred. It is based on a flawed piece of analysis which uplifted 10% of all damages, not just the general damages. That is not what the proposal is. The proposal is not in the Bill but the impact assessment that is published with it makes the same mistake. Based on a set of data from a defendant’s cost consultants, Jaggards, it uplifts 10% on all damages, not just general damages. That is not the proposal, even though the proposal is not in the Bill and we are told it will come elsewhere. It is also, in my view as a practitioner, an unworkable proposal. The concern is that when you negotiate with defendants, you ring up and you say, “This claim is worth £2,500.” They say, “No, it is worth £2,000”. We say, “Okay, we’ll do a deal of £2,250.” I then say, “Can I have my 10% uplift on general damages?” They will say, “You’ve got it already.” We are never going to see the 10% uplift in practice.

Philip Hollobone: Thirty seconds to go.

Catherine Hopkins:  I was just going to say that we believe that the tortfeasor should pay, in answer to Mr Slaughter’s question. If the tortfeasor is insured, he has prudently provided for this eventuality. The NHS is obviously self-insured in a way through the CNST. It has not been raised so far today, but I should just like to raise a concern that I see no impact assessment on the NHS in the cumulative impact assessment to the Bill. We would question how much extra it will cost the NHS.

Philip Hollobone: Order. I thank our witnesses for coming before us today.

Ordered, That further consideration be now adjourned. —(Jeremy Wright.)

Adjourned till Tuesday 19 July at Nine o’clock.